Jay Project Report 1

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LOVELY PROFESSIONAL UNIVERSITY

DEPARTMENT OF MANAGEMENT

Report on Summer Training

[Title]

COMPARATIVE STUDY OF MUTUAL FUND (SIP) AND

ULIPS(ONE TIME INVESTMENT) OF SBI

Submitted to Lovely Professional University

In partial fulfillment of the

Requirements for the award of Degree of

Master of Business Administration

Submitted by:

Name of the student: JAIRAGHUVEER BAWA

University Roll No.: RR1903A03

DEPARTMENT OF MANAGEMENT

LOVELY PROFESSIONAL UNIVERSITY

PHAGWARA


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ACKNOWLEDGEMENT

With regard to my Project with Mutual Fund I would like to thank each and every one who

offered help, guideline and support whenever required.

I am extremely grateful to my external guide, Mr. Harshdeep singh for their

valuable guidance and timely suggestions. I would like to thank my internal guide Mr. H.S.

Bedi faculty members of lovely Professional university, Phagwara, Punjab for the

valuable guidance& support.

I would also like to extend my thanks to my members and friends for their

support.

JAIRAGHUVEER BAWA


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DECLERATION

I hereby declare that this Project Report entitled COMPARISION STUDY OF SBI

MUTUAL FUND AND ULIPS in the partial fulfillment of the requirement of Master

of Business Administration (MBA) of lovely Professional university, Phagwara, Punjab

is based on primary & secondary data found by me in various departments, books,

magazines and websites & Collected by me in under guidance of Mr H.S. BEDI .

DATE: JAIRAGHUVEER BAWA

REG. NO.1090241

ROLL NO. RR1903A03


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EXECUTIVE SUMMARY

In few years Mutual Fund has emerged as a tool for ensuring ones financial well being.

Mutual Funds have not only contributed to the India growth story but have also helped families

tap into the success of Indian Industry. As information and awareness is rising more and more

people are enjoying the benefits of investing in mutual funds. The main reason the number of

retail mutual fund investors remains small is that nine in ten people with incomes in India do

not know that mutual funds exist. But once people are aware of mutual fund investment

opportunities, the number who decide to invest in mutual funds increases to as many as one in

five people. The trick for converting a person with no knowledge of mutual funds to a new

Mutual Fund customer is to understand which of the potential investors are more likely to buy

mutual funds and to use the right arguments in the sales process that customers will accept asimportant and relevant to their decision.

This Project gave me a great learning experience and at the same time it gave me enough scope

to implement my analytical ability. The analysis and advice presented in this Project Report is

based on market research on the saving and investment practices of the investors and

preferences of the investors for investment in Mutual Funds. This Report will help to know

about the investors Preferences in Mutual Fund means Are they prefer any particular Asset

Management Company (AMC), Which type of Product they prefer, Which Option (Growth or Dividend) they prefer or Which Investment Strategy they follow (Systematic Investment Plan

or One time Plan). This Project as a whole can be divided into two parts.

The first part gives an insight about Mutual Fund and its various aspects, the Company Profile,

Objectives of the study, Research Methodology. One can have a brief knowledge about Mutual

Fund and its basics through the Project.

The second part of the Project consists of data and its analysis collected through survey. For the collection of Primary data I made a questionnaire and survey. This Project covers the topic

COMPARISION STUDY SIP AND ONE TIME INVESTMENT OF SBI MUTUAL FUND

INDUSTRY. The data collected has been well organized and presented. I hope the research

findings and conclusion will be of use.


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CONTENTS

Sr. No Content

1 ACKNOWLEDGEMENT

2 DECLARATION

3 EXECUTIVE SUMMARY

4 INTRODUCTION

5 COMPANY PROFILE

6 OBJECTIVES AND SCOPE

7 RESEARCH METHODOLOGY

8 DATA ANALYSIS AND INTERPRETATION

9 FINDINGS AND CONCLUSIONS

10SUGGESTIONS & RECOMMENDATIONS

11 BIBLIOGRAPHY


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INDUSTRY PROFILE


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The mutual fund industry is a lot like the film star of the finance business. Though it is perhaps

the smallest segment of the industry, it is also the most glamorous in that it is a young industry

where there are changes in the rules of the game everyday, and there are constant shifts andupheavals. The mutual fund is structured around a fairly simple concept, the mitigation of risk

through the spreading of investments across multiple entities, which is achieved by the pooling

of a number of small investments into a large bucket. Yet it has been the subject of perhaps the

most elaborate and prolonged regulatory effort in the history of the country.

A little history : The mutual fund industry started in India in a small way with the UTI Act

creating what was effectively a small savings division within the RBI. Over a period of 25 years

this grew fairly successfully and gave investors a good return, and therefore in 1989, as the nextlogical step, 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 a

number of mistakes were made and hence the mutual fund schemes, which invested in lesser-

known stocks and at very high levels, became loss leaders for retail investors. From those days to

today the 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 brining in the large

investor, so that it can create a significant base corpus, which can make the retail investor feel

more secure.

The Indian MF industry has Rs 5.67 lakh crore of assets under management. As per data

released by Association of Mutual Funds in India, the asset base of all mutual fund combined

has risen by 7.32% in April, the first month of the current fiscal. As of now, there are 33 fund

houses in the country including 16 joint ventures and 3 whollyowned foreign asset

managers. According to a recent McKinsey report, the total AUM of the Indian mutual fund

industry could grow to $350-440 billion by 2012, expanding 33% annually. While the revenue

and profit (PAT) pools of Indian AMCs are pegged at $542 million and $220 million

respectively, it is at par with fund houses in developed economies. Operating profits for AMCs


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in India, as a

percentage

of average

assets under

management,

were at 32

basis points

in 2006-07,

while the

number was

12 bps in

UK, 17 bpsin Germany

and 18 bps in

the US,

in the same

time frame.

Major

players in

Indian

mutual fund

industry and

their AUM

Mutual Fund NameNo. of Schemes*

As on Corpus

ABN AMRO M F 337 July 31, 2008 7803

AIG GlobalM F 54 July 31, 2008 3513

SBI Mutual Fund 177 July 31, 2008 29151.00

Birla Mutual Fund 343 July 31, 2008 37497.00

BOB Mutual Fund 22 July 31, 2008 56.00

Canara Robeco Mutual Fund 54 July 31, 2008 4576.00

DBS Chola Mutual Fund 80 July 31, 2008 1853.00

Deutsche Mutual Fund 187 July 31, 2008 10792.00

DSP Merrill Lynch Mutual

Fund

211 Feb 29, 2008 19483.00

Escorts Mutual Fund 26 Feb 29, 2008 177.00

Fidelity Mutual Fund 39 Mar 31, 2008 7464.00

Franklin Templeton Investments 230 July 31, 2008 24441.00

HDFC Mutual Fund 371 July 31, 2008 50,752.00

HSBC Mutual Fund 221 July 31, 2008 16,385.00

ICICI Prudential Mutual Fund 431 July 31, 2008 55,161.00ING Mutual Fund 262 July 31, 2008 7091.00

JPMorgan Mutual Fund 9 July 31, 2008 3054.00

Kotak Mahindra Mutual Fund 185 July 31, 2008 18,782.00

LIC Mutual Fund 112 July 31, 2008 17,499.00

Lotus India Mutual Fund 216 July 31, 2008 7831.00

Morgan Stanley Mutual Fund 3 July 31, 2008 2,814.00

PRINCIPAL Mutual Fund 151 July 31, 2008 11,359.00

Quantum Mutual Fund 6 July 31, 2008 66.00

Reliance Mutual Fund 345 July 31, 2008 84,564.00

Sahara Mutual Fund 45 July 31, 2008 175.00

Mirae asset mutual fund 255 July 31, 2008 2546.00

Sundaram Mutual Fund 219 July 31, 2008 11,898.00

Tata Mutual Fund 389 July 31, 2008 20,443.00
http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM046http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM026http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM005http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM006http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM008http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM009http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM044http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM010http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM010http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM011http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM047http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM037http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM041http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM043http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM024http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM038http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM033http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM021http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM022http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM016http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM048http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM025http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM012http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM032http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM034http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM026http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM005http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM006http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM008http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM009http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM044http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM010http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM010http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM011http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM047http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM037http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM041http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM043http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM024http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM038http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM033http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM021http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM022http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM016http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM048http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM025http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM012http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM032http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM034http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM046


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GROWTH OF MUTUAL FUND INDUSTRY IN INDIA

While the Indian mutual fund industry has grown in size by about 320% from March, 1993 (Rs.

470 billion) to December, 2004 (Rs. 1505 billion) in terms of AUM, the AUM of the sector

excluding UTI has grown over 8 times from Rs. 152 billion in March 1999 to $ 148 billion as at
http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM045


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March 2008.

Though India is a minor player in the global mutual fund industry, its AUM as a proportion of

the global AUM has steadily increased and has doubled over its levels in 1999. The growth rate

of Indian mutual fund industry has been increasing for the last few years. It was approximately

0.12% in the year of 1999 and it is noticed 0.25% in 2004 in terms of AUM as percentage of

global AUM.

Some facts for the growth of mutual funds in India

100% growth in the last 6 years. Number of foreign AMCs is in the queue to enter the Indian markets. Our saving rate is over 23%, highest in the world. Only channelizing these savings in

mutual funds sector is required. We have approximately 29 mutual funds which is much less than US having more than

800. There is a big scope for expansion. Mutual fund can penetrate rurals like the Indian insurance industry with simple and

limited products. SEBI allowing the MF's to launch commodity mutual funds.

Emphasis on better corporate governance. Trying to curb the late trading practices. Introduction of Financial Planners who can provide need based advice.

SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL FUNDS)

REGULATIONS, 1996

The fast growing industry is regulated by Securities and Exchange Board of India (SEBI)

since inception of SEBI as a statutory body. SEBI initially formulated SECURITIES

AND EXCHANGE BOARD OF INDIA (MUTUAL FUNDS) REGULATIONS, 1993


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providing detailed procedure for establishment, registration, constitution, management of

trustees, asset management company, about schemes/products to be designed, about

investment of funds collected, general obligation of MFs, about inspection, audit etc.

based on experience gained and feedback received from the market SEBI revised the

guidelines of 1993 and issued fresh guidelines in 1996 titled SECURITIES AND

EXCHANGE BOARD OF INDIA (MUTUAL FUNDS) REGULATIONS, 1996. The

said regulations as amended from time to time are in force even today. The SEBI mutual fund regulations contain ten chapters and twelve schedules. Chapters

containing material subjects relating to regulation and conduct of business by Mutual

Funds.

CHARACTERISTICS OF MUTUAL FUNDS

The ownership is in the hands of the investors who have pooled in their funds.

It is managed by a team of investment professionals and other service providers.


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The pool of funds is invested in a portfolio of marketable investments.

The investors share is denominated by units whose value is called as Net Asset Value

(NAV) which changes everyday.

The investment portfolio is created according to the stated investment objectives of the

fund.

ADVANTAGES OF MUTUAL FUNDS

The advantages of mutual funds are given below: -

Portfolio Diversification

Mutual funds invest in a number of companies. This diversification reduces the risk because

it happens very rarely that all the stocks decline at the same time and in the same proportion. So

this is the main advantage of mutual funds.

Professional Management

Mutual funds provide the services of experienced and skilled professionals, assisted byinvestment research team that analysis the performance and prospects of companies and select

the suitable investments to achieve the objectives of the scheme.

Low Costs

Mutual funds are a relatively less expensive way to invest as compare to directly investing in

a capital markets because of less amount of brokerage and other fees.

Liquidity

This is the main advantage of mutual fund, that is whenever an investor needs money he can

easily get redemption, which is not possible in most of other options of investment. In open-

ended schemes of mutual fund, the investor gets the money back at net asset value and on the


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other hand in close-ended schemes the units can be sold in a stock exchange at a prevailing

market price.

Transparency

In mutual fund, investors get full information of the value of their investment, the proportion

of money invested in each class of assets and the fund managers investment strategy

Flexibility

Flexibility is also the main advantage of mutual fund. Through this investors can

systematically invest or withdraw funds according to their needs and convenience like regular investment plans, regular withdrawal plans, dividend reinvestment plans etc.

Convenient Administration

Investing in a mutual fund reduces paperwork and helps investors to avoid many problems

like bad deliveries, delayed payments and follow up with brokers and companies. Mutual funds

save time and make investing easy.

Affordability

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

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

strategy.

Well Regulated

All mutual funds are registered with SEBI and they function with in the provisions of strictregulations designed to protect the interest of investors. The operations of mutual funds are

regularly monitored by SEBI.


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DISADVANTAGES OF MUTUAL FUNDS

Mutual funds have their following drawbacks:

No Guarantees

No investment is risk free. If the entire stock market declines in value, the value of mutual

fund shares will go down as well, no matter how balanced the portfolio. Investors encounter

fewer risks when they invest in mutual funds than when they buy and sell stocks on their own.

However, anyone who invests through mutual fund runs the risk of losing the money.

Fees and Commissions

All funds charge administrative fees to cover their day to day expenses. Some funds also

charge sales commissions or loads to compensate brokers, financial consultants, or financial

planners. Even if you dont use a broker or other financial advisor, you will pay a sales

commission if you buy shares in a Load Fund.

Taxes

During a typical year, most actively managed mutual funds sell anywhere from 20 to 70

percent of the securities in their portfolios. If your fund makes a profit on its sales, you will pay

taxes on the income you receive, even you reinvest the money you made.

Management Risk

When you invest in mutual fund, you depend on fund manager to make the right decisions

regarding the funds portfolio. If the manager does not perform as well as you had hoped, you

might not make as much money on your investment as you expected. Of course, if you invest in

index funds, you forego management risk because these funds do not employ managers.


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STRUCTURE OF MUTUAL FUND

There are many entities involved and the diagram below illustrates the structure of mutual funds:

-

TYPES OF MUTUAL FUND SCHEMES

In India, there are many companies, both public and private that are engaged in the trading of

mutual funds. Wide varieties of Mutual Fund Schemes exist to cater to the needs such as

financial position, risk tolerance and return expectations etc. Investment can be made either in


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the debt Securities or eSquity .The table below gives an overview into the existing types of

schemes in the Industry.

TYPES OF MUTUAL FUND SCHEME

Generally two options are available for every scheme regarding dividend payout and growth

option. By opting for growth option an investor can have the benefit of long-term growth in the

stock market on the other side by opting for the dividend option an investor can maintain his

liquidity by receiving dividend time to time. Some time people refer dividend option as dividend

fund and growth fund. Generally decisions regarding declaration of the dividend depend upon

the performance of stock market and performance of the fund.

By structure By Investment

Objectives

Other Schemes

Open-endedSchemes

IntervalSchemes

Sector specificfund

Index Schemes

Tax saving fund

Small capfund

EquitySchemes

DebtSchemes

Close EndedSchemes

MM Mutualfund

Other DebtSchemes

FMP

Any Other

Equity Fund

Mid capFund

Large capfund


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OPTION REGARDING DIVIDEND

Systematic Investment Plan (SIP)

Systematic investment plan is like Recurring Deposit in which investor invests in the

particular scheme on regular intervals. In the case it is convenient for salaried class and middle-

income group. In this case on regular interval units of specified amount is created. An investor can

make payment by regular payments by issuing cheques, post dated cheques, ECS, standing

Mandate etc. SIP can be started in the any open-ended fund if there is provision of it. There are

some entry and exit load barriers for discontinuation and redemption of the fund before the said

period.

According to Structure

Dividend Growth

ReinvestedPayout


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Open Ended Funds

An open ended fund is one that is available for subscription all through the year. These do not

have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value (NAV)

related prices. The key feature of open ended schemes is liquidity.

Close Ended Funds

A close ended fund has a stipulated maturity period which generally ranging from 3 to 15

years. The fund is open for subscription only during a specified period. Investors can invest inthe scheme at the same time of the initial public issue and thereafter they can buy and sell the

units of the scheme on the stock exchanges where they are listed. In order to provide an exit

route to the investors, some close ended funds give an option of selling back the units to the

mutual fund through periodic repurchase at NAV related prices.

Interval Funds

Interval funds combine the features of open ended and close ended schemes. They are openfor sales or redemption during pre-determined intervals at their NAV.

According to Investment Objective:

Growth Funds

The aim of growth funds is to provide capital appreciation over the medium to long term.

Such schemes normally invest a majority of their corpus in equities. It has been proven

that returns from stocks are much better than the other investments had over the long


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term. Growth schemes are ideal for investors having a long term outlook seeking growth

over a period of time.

Income Funds

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

Such schemes generally invest in fixed income securities such as bonds, corporate

debentures and government securities. Income funds are ideal for capital stability and

regular income.

Balanced Funds

The aim of balanced funds is to provide both growth and regular income. Such

schemes periodically distribute a part of their earning and invest both in equities and

fixed income securities in the proportion indicated in their offer documents. In a rising

stock market, the NAV of these schemes may not normally keep pace or fall equally

when the market falls. These are ideal for investors looking for a combination of income

and moderate growth.

Money Market Funds

The main aim of money market funds is to provide easy liquidity, preservation of

capital and moderate income. These schemes generally invest in safe short term

instruments such as treasury bills, certificates of deposit, commercial paper and inter

bank call money. Returns on these schemes may fluctuate depending upon the interest

rates prevailing in the market. These are ideal for corporate and individual investors as a

means to park their surplus funds for short periods.

Other Schemes

Tax Saving Schemes


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These schemes offer tax rebates to the investors under specific provisions of the

Indian Income Tax laws as the government offers tax incentives for investment in

specified avenues. Investments made in Equity Linked Saving Schemes (ELSS) and

Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act

also provides opportunities to investors to save capital gains.

Special Schemes:

Index Schemes

Index funds attempt to replicate the performance of a particular index such as theBSE Sensex or the NSE 50.

Sector Specific Schemes

Sector funds are those which invest exclusively in a specified industry or a group of

industries or various segments such as A group shares or initial public offerings.

Bond Schemes

It seeks investment in bonds, debentures and debt related instrument to generate

regular income flow.

FREQUENTLY USED TERMS

Advisor - Is employed by a mutual fund organization to give professional advice on the funds

investments and to supervise the management of its asset.


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Diversification The policy of spreading investments among a range of different securities to

reduce the risk.

Net Asset Value (NAV) - Net Asset Value is the market value of the assets of the scheme minus

its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of

units outstanding on the Valuation Date.

Sales Price - Is the price you pay when you invest in a scheme. Also called Offer Price. It may

include a sales load.

Repurchase Price - Is the price at which a close-ended scheme repurchases its units and it may

include a back-end load. This is also called Bid Price.

Redemption Price - Is the price at which open-ended schemes repurchase their units and close-

ended schemes redeem their units on maturity. Such prices are NAV related.

Sales Load - Is a charge collected by a scheme when it sells the units. Also called Front-end

load. Schemes that do not charge a load are called No Load schemes.

ULIPS

PLATFORMS OF LIFE INSURANCE- UNIT LINKED INSURANCE PLANS


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World over , insurance come in different forms and shapes . although the generic names may

find similar , the difference in product features makes one wonder about the basis on which these

products are designed .With insurance market opened up , Indian customer has suddenly found

himself in a market place where he is bombarded with a lot of jargon as well as marketing

gimmicks with a very little knowledge of what is happening . This module is aimed at clarifying

these underlying concepts and simplifying the different products available in the market.

We have many products like Endowment , Whole life , Money back etc. All these products are

based on following basic platforms or structures viz.

Traditional Life

Universal Life or Unit Linked Policies

TYPES OF ULIP

There are various unit linked insurance plans available in the market. However, the key ones are

pension, children, group and capital guarantee plans.


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The pension plans come with two variations with and without life cover and are meant for

people who want to generate returns for their sunset years.

The children plans, on the other hand, are aimed at taking care of their educational and other

needs..

Apart from unit-linked plans for individuals, group unit linked plans are also available in the

market. The Group linked plans are basically designed for employers who want to offer certain

benefits for their employees such as gratuity, superannuation and leave encashment.

The other important category of ULIPs is capital guarantee plans. The plan promises the

policyholder that at least the premium paid will be returned at maturity. But the guaranteed

amount is payable only when the policy's maturity value is below the total premium paid by the

individual till maturity. However, the guarantee is not provided on the actual premium paid but

only on that portion of the premium that is net of expenses (mortality, sales and marketing,

administration).

How ULIPs work

ULIPs work on the lines of mutual funds. The premium paid by the client (less any charge) is

used to buy units in various funds (aggressive, balanced or conservative) floated by the insurance

companies. Units are bought according to the plan chosen by the policyholder. On every

additional premium, more units are allotted to his fund. The policyholder can also switch among

the funds as and when he desires. While some companies allow any number of free switches to

the policyholder, some restrict the number to just three or four. If the number is exceeded, a

certain charge is levied.

Individuals can also make additional investments (besides premium) from time to time to

increase the savings component in their plan. This facility is termed "top-up". The money parked

in a ULIP plan is returned either on the insured's death or in the event of maturity of the policy.

In case of the insured person's untimely death, the amount that the beneficiary is paid is the

higher of the sum assured (insurance cover) or the value of the units (investments). However,

some schemes pay the sum assured plus the prevailing value of the investments.


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ULIP - KEY FEATURES

Premiums paid can be single, regular or variable. The payment period too can be regular

or variable. The risk cover can be increased or decreased.

As in all insurance policies, the risk charge (mortality rate) varies with age.

The maturity benefit is not typically a fixed amount and the maturity period can be

advanced or extended.

Investments can be made in gilt funds, balanced funds, money market funds, growth

funds or bonds.

The policyholder can switch between schemes, for instance, balanced to debt or gilt to

equity, etc.

The maturity benefit is the net asset value of the units.

The costs in ULIP are higher because there is a life insurance component in it as well, in

addition to the investment component.

Insurance companies have the discretion to decide on their investment portfolios.

Being transparent the policyholder gets the entire episode on the performance of his fund.

ULIP products are exempted from tax and they provide life insurance.


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Provides capital appreciation.

Investor gets an option to choose among debt, balanced and equity funds.


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COMPARISON BETWEEN ULIPS (ONE TIME) AND MUTUAL FUNDS (SIP) :

Unit Linked Insurance Policies (ULIPs) as an investment avenue are closest to mutual funds in

terms of their structure and functioning. As is the case with mutual funds, investors in ULIPs are

allotted units by the insurance company and a net asset value (NAV) is declared for the same on

a daily basis.

Similarly ULIP investors have the option of investing across various schemes similar to the ones

found in the mutual funds domain, i.e. diversified equity funds, balanced funds and debt funds to

name a few. Generally speaking, ULIPs can be termed as mutual fund schemes with an insurance

component.

However it should not be construed that barring the insurance element there is nothing

differentiating mutual funds from ULIPs.

Points of difference between the two:

1. Mode of investment/ investment amounts

Mutual fund investors have the option of either making lump sum investments or investing using

the systematic investment plan (SIP) route which entails commitments over longer time

horizons. The minimum investment amounts are laid out by the fund house.

ULIP investors also have the choice of investing in a lump sum (single premium) or using the

conventional route, i.e. making premium payments on an annual, half-yearly, quarterly or

monthly basis. In ULIPs, determining the premium paid is often the starting point for the

investment activity. This is in stark contrast to conventional insurance plans where the sum

assured is the starting point and premiums to be paid are determined thereafter.


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ULIP investors also have the flexibility to alter the premium amounts during the policy's tenure.

For example an individual with access to surplus funds can enhance the contribution thereby

ensuring that his surplus funds are gainfully invested; conversely an individual faced with a

liquidity crunch has the option of paying a lower amount (the difference being adjusted in the

accumulated value of his ULIP). The freedom to modify premium payments at one's

convenience clearly gives ULIP investors an edge over their mutual fund counterparts.

2. Expenses

In mutual fund investments, expenses charged for various activities like fund management, sales

and marketing, administration among others are subject to pre-determined upper limits as

prescribed by the Securities and Exchange Board of India.

For example equity-oriented funds can charge their investors a maximum of 2.5% per annum on

a recurring basis for all their expenses; any expense above the prescribed limit is borne by the

fund house and not the investors.

Similarly funds also charge their investors entry and exit loads (in most cases, either is

applicable). Entry loads are charged at the timing of making an investment while the exit load is

charged at the time of sale.

Insurance companies have a free hand in levying expenses on their ULIP products with no upper

limits being prescribed by the regulator, i.e. the Insurance Regulatory and Development

Authority. This explains the complex and at times 'unwieldy' expense structures on ULIP

offerings. The only restraint placed is that insurers are required to notify the regulator of all the

expenses that will be charged on their ULIP offerings.

Expenses can have far-reaching consequences on investors since higher expenses translate into

lower amounts being invested and a smaller corpus being accumulated. ULIP-related expenses

have been dealt with in detail in the article "Understanding ULIP expenses".

3. Portfolio disclosure


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Mutual fund houses are required to statutorily declare their portfolios on a quarterly basis, albeit

most fund houses do so on a monthly basis. Investors get the opportunity to see where their

monies are being invested and how they have been managed by studying the portfolio.

There is lack of consensus on whether ULIPs are required to disclose their portfolios. During our interactions with leading insurers we came across divergent views on this issue.

While one school of thought believes that disclosing portfolios on a quarterly basis is mandatory,

the other believes that there is no legal obligation to do so and that insurers are required to

disclose their portfolios only on demand.

Some insurance companies do declare their portfolios on a monthly/quarterly basis. However the

lack of transparency in ULIP investments could be a cause for concern considering that the

amount invested in insurance policies is essentially meant to provide for contingencies and for

long-term needs like retirement; regular portfolio disclosures on the other hand can enable

investors to make timely investment decisions.

4. Flexibility in altering the asset allocation

As was stated earlier, offerings in both the mutual funds segment and ULIPs segment are largely

comparable. For example plans that invest their entire corpus in equities (diversified equity

funds), a 60:40 allotment in equity and debt instruments (balanced funds) and those investing

only in debt instruments (debt funds) can be found in both ULIPs and mutual funds.

If a mutual fund investor in a diversified equity fund wishes to shift his corpus into a debt from

the same fund house, he could have to bear an exit load and/or entry load.

On the other hand most insurance companies permit their ULIP inventors to shift investments

across various plans/asset classes either at a nominal or no cost (usually, a couple of switches are

allowed free of charge every year and a cost has to be borne for additional switches). Effectively

the ULIP investor is given the option to invest across asset classes as per his convenience in a

cost-effective manner. This can prove to be very useful for investors, for example in a bull


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market when the ULIP investor's equity component has appreciated, he can book profits by

simply transferring the requisite amount to a debt-oriented plan.

5. Tax benefits

ULIP investments qualify for deductions under Section 80C of the Income Tax Act. This holds

good, irrespective of the nature of the plan chosen by the investor. On the other hand in the

mutual funds domain, only investments in tax-saving funds (also referred to as equity-linked

savings schemes) are eligible for Section 80C benefits.

Maturity proceeds from ULIPs are tax free. In case of equity-oriented funds (for example

diversified equity funds, balanced funds), if the investments are held for a period over 12months, the gains are tax free; conversely investments sold within a 12-month period attract

short-term capital gains tax @ 10%.

Similarly, debt-oriented funds attract a long-term capital gains tax @ 10%, while a short-term

capital gain is taxed at the investor's marginal tax rate.

Despite the seemingly similar structures evidently both mutual funds and ULIPs have their

unique set of advantages to offer. As always, it is vital for investors to be aware of the nuances in

both offerings and make informed decisions.


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Investing in ulips? Remember

The high returns (above 20 per cent) are definitely not sustainable over a long term, as they

have been generated during the biggest bull run in recent stock market history.

The free hand given to ULIPs might prove risky if the timing of exit happens to coincide with a

bearish market phase, because of the inherently high equity component of these schemes.

While a debt-oriented ULIP scheme might be superior to a debt option in a conventional mutual

fund due to tax concessions that insurance companies enjoy, such tax incentives may not last.

Look beyond NAVs

The appreciation in the net asset value (NAV) of ULIPs barely indicate the actual returns earned

on your investment. The various charges on your policy are deducted either directly from

premiums before investing in units or collected on a monthly basis by knocking off units.

Either way, the charges do not affect the NAV; but the number of units in your account suffers.

You might have access to daily NAVs but your real returns may be substantially lower.

A rough calculation shows that if our investments earn a 12 per cent annualised return over a 20-

year period in a growth fund, when measured by the change in NAV, the real pre- tax returns

might be only 9 per cent. The shorter the term, the lower the real returns.

How charges dent returns

An initial allocation charge is deducted from our premiums for selling, marketing and broker

commissions. These charges could be as high as 65 per cent of the first year premiums. Premium

allocation charges are usually very high (5-65 per cent) in the first couple of years, but taper off

later. The high initial charges mainly go towards funding agent commissions, which could be as

high as 40 per cent of the initial premium as per IRDA (Insurance Regulatory and Development

Authority) regulations.

The charges are higher for a linked plan than a non-linked plan, as the former require lot more

servicing than the latter, such as regular disclosure of investments, switches, re-direction of


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premiums, withdrawals, and so on. Insurance companies have the discretion to structure their

expenses structure whereas a mutual fund does not have that luxury. The expense ratios in their

case cannot exceed 2.5 per cent for an equity plan and 2.25 per cent for a debt plan respectively.

The lack of regulation on the expense front works to the detriment of investors in ULIPs.

The front-loading of charges does have an impact on overall returns as we lose out on the

compounding benefit. Insurance companies explain that charges get evened out over a long term.

Thus we are forced to stay with the plan for a longer tenure to even out the effect of initial

charges as the shorter the tenure, the lower our real returns.

If we want to withdraw from the plan, you lose out, as you will have to pay withdrawal charges

up to a certain number of years.

In effect, when we lock in our money in a ULIP, despite the promise of flexibility and liquidity,

we are stuck with one fund management style. This is all the more reason to look for an

established track record before committing our hard-earned money.

Evaluate alternative options

As an investor we have to evaluate alternative options that give superior returns before

considering ULIPs.

Insurance companies argue that comparing ULIPs with mutual funds is like comparing oranges

with apples, as the objectives are different for both the products.

Most ULIPs give us the choice of a minimum investment cover so that we can direct maximum

premiums towards investments.

Thus, both ULIPs and mutual funds target the same customers . If risk cover is your primary

objective, pure insurance plans are less expensive.

When we choose a mutual fund, we look for an established track record of three to five years of

consistent returns across various market cycles to judge a fund's performance.


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It is early days for insurance companies on this score; investing substantially in linked plans

might not be advisable at this juncture.

Try top-ups

Insurance companies allow us to make lump-sum investments in excess of the regular premiums.

These top-ups are charged at a much lower rate usually one to two per cent. The expenses

incurred on a top-up including agent commissions are much lower than regular premiums. Some

companies also give a credit on top-ups. For instance, if you pay in Rs 100 as a top up, the actual

allocation to units will be Rs 101. If you keep the regular premiums to the minimum and increase

your top ups, you can save up on charges, enhancing returns in the long run.

Reduce life cover

The price of the life cover attached to a ULIP is higher than a normal term plan. Risk charges are

charged on a daily or monthly basis depending on the daily amount at risk. Rates are not locked

and are charged on a one-year renewal basis.

Our life cover charges would depend on the accumulation in your investment account. As

accumulation increases, the amount at risk for the insurance company decreases. However, with

increasing age, the cost per Rs 1,000 sum assured increases, effectively increasing your overall

insurance costs. A lower life cover could yield better returns.

Stay away from riders

Any riders, such as accident rider or critical illness rider, are also charged on a one-year renewal

basis. Opting for these riders with a plain insurance cover could provide better value for money.

ULIP's as an investment is a very good vehicle for wealth creation ,but way Unit Linke Insurance

schemes are sold by insurance company representative's and insurance advisors is not correct.

ULIP's usually have following charges built into it :

a) Up-front Charges


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b) Mortality Charges ( Charges for providing the risk cover for life)

c) Administrative Charges

d) Fund Management Charges

Mutual Fund's have the following charges :

a) Up-front charges ( Marketing, Advertising, distributors fee etc.)

b) Fund Management Charges ( expenses for managing your fund)

A few aspects of investing in ULIPs versus mutual funds.

Liquidity

ULIPs score low on liquidity. According to guidelines of the Insurance Regulatory and

Development Authority (IRDA), ULIPs have a minimum term of five years and a minimum

lockin of three years. You can make partial withdrawals after three years. The surrender value of

a ULIP is low in the initial years, since the insurer deducts a large part of your premium as

marketing and distribution costs. ULIPs are essentially long-term products that make sense only

if your time horizon is 10 to 20 years.

Mutual fund investments, on the other hand, can be redeemed at any time, barring ELSS (equity-

linked savings schemes). Exit loads, if applicable , are generally for six months to a year in

equity funds. So mutual funds score substantially higher on liquidity.

Tax efficiency

ULIPs are often pitched as tax-efficient , because your investment is eligible for exemption

under Section 80C of the Income Tax Act (subject to a limit of Rs 1 lakh). But investments in


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ELSS schemes of mutual funds are also eligible for exemption under the same section .Besides

the premium, the maturity amount in ULIPs is also tax-free , irrespective of whether the

investment was in a balanced or debt plan. So they do have an edge on mutual funds, as debt

funds are taxed at 10% without indexation benefits, and 20% with indexation benefits. The point,

though, is that if you invest in a debt plan through a ULIP, despite its tax-efficiency your post-

tax returns will be low, because of high front-end costs. Debt mutual funds dont charge such

costs.

Expenses

Insurance agents get high commissions for ULIPs, and they get them in the initial years, not

staggered over the term. So the insurer recovers most charges from you in the initial years, as it

risks a loss if the policy lapses. Typically , insurers levy enormous selling charges, averaging

more than 20% of the first years premium, and dropping to 10% and 7.5% in subsequent years.

(And this is after investors balked when charges were as high as 65%!) Compare this with

mutual funds fees of 2.25% on entry, uniform for all schemes. Different ULIPs have varying

charges, often not made clear to investors.

For instance, an agent who sells you a ULIP may get 25% of your first years premium, 10% in

the second year, 7.5% in the third and fourth year and 5% thereafter. If your annual premium is

Rs 10,000 and the agents commission in the first year is 25%, it means only Rs 7,500 of your

money is invested in the first year. So even if the NAV of the fund rises, say 20%, that year, your

portfolio would be worth only Rs 9,000much lower than the Rs 10,000 you paid. On the other

hand, if you invest Rs 10,000 in an equity scheme with a 2.25% entry load, Rs 225 is deducted ,

and the rest is invested. If the schemes NAV rises 20%, your portfolio is worth Rs 11,730. This

shows how ULIPs work out expensive for investors. Deduct the cost of a term policy from the

mutual fund returns, and youre still left with a sizeable difference.


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Chapter 2

SBI Mutual Fund

Company Profile

Awards & Achievements

ProductsMajor Funds of SBI Mutual Fund


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STATE BANK OF INDIA MUTUAL FUND

Proven Skills in Wealth Generation

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

in judicious investments and consistent wealth creation.

The fund traces its lineage to SBI - Indias largest banking enterprise. The institution has grown

immensely since its inception and today it is India's largest bank, patronised by over 80% of the

top corporate houses of the country.

SBI Mutual Fund is a joint venture between the State Bank of India and Socit Gnrale

Asset Management, one of the worlds leading fund management companies that

manages over US$ 500 Billion worldwide.


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Exploiting expertise, compounding growth

In twenty years of operation, the fund has launched 38 schemes and successfully redeemed

fifteen of them. In the process it has rewarded its investors handsomely with consistently highreturns.

A total of over 5.4 million investors have reposed their faith in the wealth generation expertise of

the Mutual Fund.

Schemes of the Mutual fund have consistently outperformed benchmark indices and have

emerged as the preferred investment for millions of investors and HNIs.

Today, the fund manages over Rs. 31,794 crores of assets and has a diverse profile of investors

actively parking their investments across 36 active schemes.

The fund serves this vast family of investors by reaching out to them through network of over

130 points of acceptance, 28 investor service centers, 46 investor service desks and 56 district

organisers.

SBI Mutual is the first bank-sponsored fund to launch an offshore fund Resurgent India

Opportunities Fund.

Growth through innovation and stable investment policies is the SBI MF credo


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Awards and achievements:

SBI Mutual Fund (SBIMF) has been the proud recipient of the:

ICRA Online Award - 8 times

The Lipper Award (Year 2005-2006)

CNBC TV - 18 Crisil Mutual Fund of the Year Award 2007

CNBC AWAAZ CONSUMER AWARDS 2007


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PRODUCTS

EQUITY FUNDS:

The investments of these schemes will predominantly be in the stock markets and endeavor will

be to provide investors the opportunity to benefit from the higher returns which stock markets

can provide. However they are also exposed to the volatility and attendant risks of stock markets

and hence should be chosen only by such investors who have high risk taking capacities and are

willing to think long term. Equity Funds include diversified Equity Funds, Sectoral Funds andIndex Funds. Diversified Equity Funds invest in various stocks across different sectors while

sectoral funds which are specialized Equity Funds restrict their investments only to shares of a

particular sector and hence, are riskier than Diversified Equity Funds. Index Funds invest

passively only in the stocks of a particular index and the performance of such funds move with

the movements of the index

Magnum COMMA Fund

Magnum Equity Fund

Magnum Global Fund

Magnum Index Fund

Magnum MidCap Fund

Magnum Multicap Fund

Magnum Multiplier Plus 1993

Magnum Sector Funds Umbrella

MSFU - Emerging Businesses Fund

MSFU - IT Fund

MSFU - Pharma Fund

MSFU - Contra Fund

MSFU - FMCG Fund


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SBI Arbitrage Opportunities Fund

SBI Blue chip Fund

SBI Infrastructure Fund - Series I

SBI Magnum Taxgain Scheme 1993 SBI ONE India Fund

SBI TAX ADVANTAGE FUND - SERIES I

DEBT SCHEMES

Debt Funds invest only in debt instruments such as Corporate Bonds, Government Securities and

Money Market instruments either completely avoiding any investments in the stock markets as in

Income Funds or Gilt Funds or having a small exposure to equities as in Monthly Income Plans

or Children's Plan. Hence they are safer than equity funds. At the same time the expected returns

from debt funds would be lower. Such investments are advisable for the risk-averse investor and

as a part of the investment portfolio for other investors.

Magnum Children`s Benefit Plan

Magnum Gilt Fund

Magnum Gilt Fund (Long Term)

Magnum Gilt Fund (Short Term)


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Magnum Income Fund

Magnum Income Plus Fund

Magnum Income Plus Fund (Saving Plan)

Magnum Income Plus Fund (Investment Plan)

Magnum Insta Cash Fund

Magnum InstaCash Fund -Liquid Floater Plan

Magnum Institutional Income Fund

Magnum Monthly Income Plan

Magnum Monthly Income Plan Floater

Magnum NRI Investment Fund

SBI Capital Protection Oriented Fund - Series I

SBI Premier Liquid Fund

SBI Short Horizon Fund

SBI Short Horizon Fund - Liquid Plus Fund

SBI Short Horizon Fund - Short Term Fund


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BALANCED SCHEMES

Magnum Balanced Fund invest in a mix of equity and debt investments. Hence they are less

risky than equity funds, but at the same time provide commensurately lower returns. They

provide a good investment opportunity to investors who do not wish to be completely exposed to

equity markets, but is looking for higher returns than those provided by debt funds.

Magnum Balanced Fund

Magnum NRI Investment Fund - FlexiAsset Plan


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MAJOR FUNDS OF SBI MF

(EQUITY FUND)

Investment Objective

The objective of the scheme would be to generate opportunities for growth along with possibility

of consistent returns by investing predominantly in a portfolio of stocks of companies

engaged in the commodity business within the following sectors - Oil& Gas, Metals,

Materials & Agriculture and in debt & money market instruments

Asset Allocation

Instrument% of Portfolio of Plan

A & BRisk Profile

Equity and equity related instruments of

commodity based companieswithin 65% 100% High

Foreign Securities/ADRs/GDRs of commodity

based companies0% - 10% High

Fixed/Floating Rate Debt instruments including

derivatives0% - 30% Medium

Money Market instruments* 0% - 30% Low


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Scheme Highlights

1.An open-ended equity scheme investing in stocks of commodity based companies.

2.Minimum Investment Rs. 5000 and in multiples of Rs. 1000 Dividend and Growth

options available.Reinvestment and payout facility available.

3.Dividends will be completely tax-free. Long term capital gains to be completely tax-

free. STT would be at the rate of 0.20% at the time of repurchase.

Minimum Application

Rs. 5000 and in multiples of Rs. 1000

1. An open-ended equity scheme investing in stocks of commodity based companies

2.Minimum Investment Rs. 5000 and in multiples of Rs. 1000 Dividend and Growth options

available.Reinvestment and payout facility available.

3.Dividends will be completely tax-free. Long term capital gains to be completely tax-

free. STT would be at the rate of 0.20% at the time of repurchase

Entry Load Exit Load

Investments below Rs. 5crores-2.25%

Investments of Rs.5

crores and above - NIL

Investments below Rs. 5 crore, exit within 6 months from the date of allotment 1%, Investments below Rs. 5 crore, exit between 6

months & 12 months from the date of allotment 0.5%, Investments

below Rs. 5 crore, exit after 12 months from the date of allotment

Nil, Investments of Rs. 5 crore and above Nil


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SIP

Rs.500/month - 12 months

Rs.1000/month - 6months,

Rs.1500/quarter - 12 months

A minimum of Rs. 500 can be withdrawn every month or quarter by indicating in the

application form or by issuing advance instructions to the Registrars at any time.


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(DEBT FUND)


The objective of the scheme is to provide the investors an opportunity to earn, in accordance

with their requirements, through capital gains or through regular dividends, returns that would be

higher than the returns offered by comparable investment avenues through investment in debt &money market securities.

Asset Allocation


A & BRisk Profile

Corporate debentures & Bonds/PSU/FI/Govt.

Guaranteed Bonds / Other including Securitised

Debt

Upto 90% High

Securitized Debt Not more than 10% of

in debtLow

Government Securities Upto 90% High

Cash & Call Money Upto 25% MediumMoney Market Instruments Upto 25% Mediom

Units of other mutual funds Upto 5% Low


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Scheme Highlights

1.Open ended Debt Scheme 2. Following Plans are available to the investors :(A) Growth Plan

(B) Dividend Plan (C) Bonus Plan (D) Floating Rate Plan Options available under

Floating Rate Plan Short Term (Growth, Dividend & Weekly Dividend)Long Term(Regular (Dividend & Growth) Long Term (Institutional (Dividend & Growth)

2. The Plans will invest their entire corpus in high quality debt (Corporate debentures,

PSU/FI/Govt guaranteed bonds), Govt securities and money market instruments

(commercial paper, certificates of deposit, T-bills, bills rediscounting, repos, short-

term bank deposits, etc). There shall be no investment in equity.

3. The Growth Plan / Option will give returns through capital gains only . No dividends shall be

declared under this Plan. The Dividend Plan will endeavour to declare regular dividends

every half year, depending on the NAV at that point of time. The Dividend Option in

Floating Rate Short Term Plan will endeavour to declare dividends on a monthly basis

while the dividend option under the Floating Rate Plan Long Term (Regular and

Institutional) Plan will declare dividends on a quarterly basis.

4 Switchover between the Plans at NAV . :Also, switchover facility at the NAV related

prices to other openend schemes of SBI Mutual Fund is available. This facility of

switchover to other schemes is not available to NRIs and FIIs


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Entry Load Exit Load Nil Up Rs. 50 lacs : 0.5%; upto 6 months. Above Rs. 50 lacs : Nil

SIP SWP


Rs.1000/month - 6months


Investors have the facility to switchover between the Plans at

NAV. Also, switchover facility at the NAV related prices to

other openend schemes of SBI Mutual Fund is available. This

facility of switchover to other schemes is not available to NRIs

and FIIs


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Magnum Balanced Fund


To provide investors long term capital appreciation along with the liquidity of an open-ended

scheme by investing in a mix of debt and equity. The scheme will invest in a diversified portfolio of equities of high growth companies and balance the risk through investing the

rest in a relatively safe portfolio of debt.

Asset Allocation


A & BRisk Profile

Equities At least 50% Medium to High

Debt Instruments like debentures, bonds,khokhas,

etc.Up to 40%

Securitized Debt Not more than 10% of

investments in debtMedium to High

Money Market Instruments Balance Low

Scheme Highlights

1.An open-ended scheme investing in a mix of debt and equity instruments. Investors get the

benefit of high expected-returns of equity investments with the safety of debt investments in one

scheme.


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2. On an ongoing basis, magnums will be allotted at an entry load of 2.25% to the NAV.

3. Scheme open for Resident Indians, Trusts, Indian Corporates, on a fully repatriable basis for

NRIs and, Overseas Corporate Bodies.

4. Facility to reinvest dividend proceeds into the scheme at NAV available.

5. Switchover facility to any other open-ended schemes of SBI Mutual Fund at NAV related

prices.

6. The scheme will declare NAV, Sale and repurchase price on a daily basis.

7. Nomination facility available for individuals applying on their behalf either singly or jointly

upto three.

Entry Load Exit LoadInvestments below Rs. 5

crores - 2.25% Investments

of Rs.5 crores and above -

NIL

Investments below Rs. 5 crore, exit within 6 months from the date

of allotment 1%, Investments below Rs. 5 crore, exit between 6

months & 12 months from the date of allotment 0.5%,

Investments below Rs. 5 crore, exit after 12 months from the date

of allotment Nil, Investments of Rs. 5 crore and above Nil

SIP SWP


Rs.1000/month - 6months


Systematic Withdrawal Plan (SWP): A minimum of Rs. 500 can be

withdrawn every month or quarter by issuing advance instructions

to the Registrars at any time. There is also a facility of a Monthly

Pension Plan, whereby investors can withdraw a minimum amount

of Rs. 500/- every month.


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RESEARCH METHODOLOGY

OBJECTIVES:

To study about the mutual funds industry.

To study the approach of investors towards mutual funds and ulips.

To study the behavior of the investors whether they prefer mutual funds or ulips?

To study which is better Mutual fund SIP or Ulips single time investment

SCOPE OF THE STUDY:

Subject matter is related to the investors approach towards mutual funds and ulips. People of age between 20 to 60 Area limited to Ludhiana. Demographics include names, age, qualification, occupation, marital status and annual

income.

STEPS OF RESEARCH DESIGN:

Define the information needed:- This first step states that what is the

information that is actually required. Information in this case we require is

that what is the approach of investors while investing their money in mutual

funds and ulips e.g. what do they consider while deciding as to invest in whichof the two i.e mutual funds or ulips. Also, it studies the extent to which the

investors are aware of the various costs that one bears while making any

investment. So, the information sought and information generated is only

possible after defining the information needed.


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Design the research:- A research design is a framework or blueprint for

conducting the research project. It details the procedures necessary for

obtaining the information needed to solve research problems. In this project,

the research design is explorative in nature.

Specify the scaling procedures:- Scaling involves creating a continuum

on which measured objects are located. Both nominal and interval scales

have been used for this purpose. Construct and pretest a questionnaire:- A questionnaire is a formalized

set of questions for obtaining information from respondents. Where as

pretesting refers to the testing of the questionnaire on a small sample of

respondents in order to identify and eliminate potential problems.

Population

All the clients of State bank of India and State bank of Patiala who are investing

money in mutual funds and ulips, both.

Sample Unit

Investors and non-investors.

Sample Size

This study involves 50 respondents.

Sampling Technique:

The sample size has been taken by non-random convenience sampling technique

Data Collection:


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Data has been collected both from primary as well as secondary sources as

described below:

Primary sources

Primary data was obtained through questionnaires filled by people and through

direct communication with respondents in the form of Interview.

Secondary sources

The secondary sources of data were taken from the various websites , books,

journals reports, articles etc. This mainly provided information about the mutual

fund and ulips industry in India.


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LIMITATIONS :

No study is free from limitations. The limitations of this study can be:

Sample size taken is small and may not be sufficient to predict the results with 100%

accuracy.

The result is based on primary and secondary data that has its own limitations.

The study only covers the area of Ludhiana that may not be applicable to other areas. The study is based only on mutual funds sip and Ulipss single time investment.


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COMPARATIVE ANALYSIS OF MUTUAL FUNDS AND ULIPS : What do

investors prefer?

Do you invest in Mutual Funds ?

response Frequenc

y

Percentage

Yes 19 62% No 31 38%Total 50 100

38%

62%

yes

no

INTERPRETATION:

62% of the people invest in mutual funds.


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If not, then what other option(s) do you prefer to invest?

Fixed deposits post office schemes

Recurring deposits

If others, please specify.

Options Frequency PercentagesFixed deposits 11 45.83Post office schemes 9 37.5Recurring deposits 4 16.66Total 24 100

Others: 7

.


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what is the mode of information that you use for insurance companies?

a) Advertisement b) Agents c) Seminar d) Work shops

44%

24%

14%

18%advertisement

agents

seminar

workshops

Interpretation: It means that all the modes of information are not the same. Advertisement

is more popular

Options Frequency percentage

Advertisements 22 44%

Agents 12 24%

Seminar 7 14%

Workshop 9 18%total 50 100


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In which sector do you prefer to invest your money?

frequency

54%

46%government sector

private sector

Interpretation: People prefer both the sectors equally.

Options Frequency

Percentages

Government sector 27 54Private sector 23 46Total 50 100


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At which rate do you want your investment to grow?

options frequency percentagesSteadily 17 34At an average rate 13 26fast 20 40total 50 100


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frequency

34%

26%

40% steadily

at an average rate

fast

interpretation: 40% of the respondents want their investments to grow fastly


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Imagine that stock market drops immediately after you invest in it then what will you do?

Options frequency

Withdraw your money 8

Wait and watch 26

Invest more in it 16

frequency

16%

52%

32%withdraw your money

wait and watch

invest more in it

Interpretation: 26% of the respondents will wait and watch even if the share market

drops.

Do you have any other investment/insurance policy?


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Options frequency PercentagesYes 34 68

No 16 32total 50 100

frequency

68%

32%

Yes

No

Interpretation: 68 % of the people had bought other investment policies.

How often do you monitor your investment?

Options frequency

Daily 15

Monthly 25

Occasionally 10


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frequency

30%

50%

20%

daily

monthlyoccasionally

Interpretation: It shows that most of the people .i.e. 50% prefer monitoring their investment on

monthly basis.

20% of the people monitor their investment occasionally.

Options frequency Percentages

Daily 15 30

Monthly 25 50

Occasionally 10 20

total 50 100


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Do you invest your money in share market?

Annual

Income

Total

Below1,50,000

1,50,000-2,50,000

2,50,000-4,00,000

Above4,00,000

Share

Market

No 12 3 3 6 24

Yes 3 4 6 13 26

Total 15 7 9 19 50

Interpretation: it states that with the rise in income, the percentage of people investing in

share market also increases.

What percentage of your income do you invest?

Options Frequenc

y

percentages

0- 5% 26 525-10% 13 2610-15% 11 22total 50 100


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frequency

52%

26%

22%

upto 5%

5-10%

10% % above

INTERPRETATION: people invest around 6% of their income.

How long have you been investing in mutual funds

Options Frequenc

y

Percentages

1-5 years 22 445-10 years 17 3410-15 years 11 12total 50 100


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frequency

44%

34%

22%

1-5 years

5-10 years

10-15 years

Interpretation: This shows that people normally tend to invest for longer term. Theres not

much of a difference between the various time periods.

In the past, you have invested mostly in (choose one):

Interpretation: In the past maximum percentage of the respondents i.e 36% of the

respondents have invested in saving a/cs and pos .

options frequency PercentagesSavings A/cs & PO schemes 18 36Mutual funds investing in bonds 6 12Mutual funds investing in stocks 3 6Balanced mutual funds 1 2Individual stocks & bonds 5 10Ulips 4 8Other instruments like real estate, gold 13 26total 50 100


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frequency

32%

41%

27%

Low

Moderate

high

Your comfort level in making investment decisions can best be described as :

INTERPRETATION: 41% of the respondents are moderately comfortable in making

investment decisions.

If in the near future if you ever plan to invest in your money in any of the mutual fund

company, which would be your choice?

options frequency PercentagesLow 14 32Moderate 18 41high 12 27total 50 100


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frequency

14%

16%

28%

22%

20% Sbi mutual fund

HDFC mutual fund

Reliance mutual fund

ABN AMRO mutual fund

others

Interpretation : People mostly prefer all the brands equally for their future investments.

Options frequency percentages

Sbi mutual fund 7 14

HDFC mutual fund 8 16

Reliance mutual fund 14 28ABN AMRO mutual fund 11 22

others 10 20

total 50 100


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CONCLUSION

A mutual fund is the ideal investment vehicle for todays complex and modern financial

scenario. Markets for equity shares, bonds and other fixes income instruments, real estate,

derivatives and other assets have become mature and information driven. Today each and every

person is fully aware of every kind of investment proposal. Everybody wants to invest money,

which entitled of low risk, high returns and easy redemption. In my opinion before investing in

mutual funds, one should be fully aware of each and everything.

At the same time Ulips as an investment avenue is good for people who has interest in staying

for a longer period of time, that is around 10 years and above. Also in the coming times, Ulips

will grow faster. Ulips are actually being publicized more and also the other traditional

endowment policies are becoming unattractive because of lower interest rate. It is good for

people who were investing in ULIP policies of insurance companies as their investments earn

them a better return than the other policies.


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FINDINGS

Highest number of investors comes from the salaried class.

Highest number of investors comes from the age group of 25-35.

Most of the people have been investing their money n the share market belong to

Rs.400000 and above income group. Mostly investors prefer monitoring their investment on monthly basis or SIP.

Most of the people invest upto 6% of their annual income in mutual funds.

Most of the people between the age group of 25 35 invest their money in share market.


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RECOMMENDATIONS

The performance of the mutual fund depends on the previous years Net Asset Value of the fund.

All schemes are doing well. But the future is uncertain. So, the AMC (Asset under Management

Companies) should take the following steps: -

1. The people do not want to take risk. The AMC should launch more diversified

funds so that the risk becomes minimum. This will lure more and more people to

invest in mutual funds.

2. The expectation of the people from the mutual funds is high. So, the portfolio of

the fund should be prepared taking into consideration the expectations of the

people.

3. Try tp reduce fund charges, administration charges and other charges which helps

to invest more funds in the security market and earn good returns.

4. Diffferent campaigns should be launched to educate people regarding mutual

funds.

5. companies should give regular dividends as it depicts profitability.

6. Mutual funds should concentrate on differentiating the portfolio of their MF than

their competitors MF

7. Companies should give handsome brokerage to brokers so that they get attractedtowards distribution of the funds.


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ANNEXURES

QUESTIONNAIRE

I am JAIRAGHUVEER BAWA pursuing MBA from Lovely Professional University, Phagwara,

Punjab. As a part of the curriculum I am doing research on COMPARATIVE ANALYSIS OF

MUTUAL FUNDS (SIP) AND ULIPS(ONE TIME). Kindly help me in the same by filling the

Questionnaire. Your response would be kept strictly confidential and would be used only for

academic research.

Do you invest in Mutual Funds or Ulips?

Yes ( ) No ( )

If not, then what other option(s) do you prefer to invest?

Fixed deposits ( ) post office schemes ( )

Recurring deposits ( )

If others, please specify.

How do you get the information of the various Insurance Companies?

a) Advertisement b) Agents c) Seminar d) Work shops


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In which sector do you prefer to invest your money?

a) Private Sector ( ) b) Government Sector ( )

At which rate do you want your investment to grow?

o Steadily

o At an average rate

o Fast

Which factor do you consider before investing in mutual fund or Ulips? (tick)

Safety of principal Low risk High returns Maturity period

Terms and conditions

Do you invest your money in share market?

Yes ( ) no( )

Imagine that stock market drops immediately after you invest in it then what will you

do?

Withdraw your money

Wait and watch

Invest more in it


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In the past, you have invested mostly in (choose one):

Savings A/cs & PO schemes ( ) Mutual funds investing in bonds ( )

Mutual funds investing in stocks ( ) Balanced mutual funds ( )

Individual stocks & bonds ( ) Ulips ( )

Other instruments like real estate, gold ( )

You would describe your financial situation as being :

Very unstable. ( ) Somewhat unstable ( ).

Moderately stable. ( ) Stable. ( )

Very stable ( )

Your comfort level in making investment decisions can best be described as

Low ( ) moderate ( ) high ( )

If in the near future if you ever plan to invest in your money in any of the mutual fund

company, which would be your choice?

Sbi mutual fund ( ) HDFC mutual fund ( )

Reliance mutual fund ( ) ABN AMRO mutual fund ( )

others ( )


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PERSONAL DETAILS

Name:

Age Group:

( ) Below 20

( ) Between 20-30

( ) Between 30-40

( ) Above 40

Qualification:

Under graduate Graduate

Post graduate Other:_______________

Occupation:

( ) Salaried ( ) Business ( ) Housewife

( ) Professional ( ) Retired ( ) Other: _________

Marital status: ( ) Single ( ) Married

Jay Project Report 1

Documents

Transcript of Jay Project Report 1