PROJECT REPORT ON A COMPARITIVE OF MUTUAL FUNDS WITH OTHER INVESTMENT OPTIONS

Submitted To: Ms Anju Batra Ms Sakshi Saxena

Submitted By: Madhurima Mitra 11712303911 MBA IIB (2011-2013)

Delhi Institute of Advanced Studies (Affiliated to Guru Gobind Singh Indraprastha University) Plot No.-6, Sector-25, Rohini New Delhi-110085

CERTIFICATE

Certified that this project report titled A Comparitive study of Mutual funds with other Investment option is the bonafied work of Ms Madhurima Mitra who carried out the research under my supervision certified further, that to best to my knowledge the work reported herein doesnt form any part of other project report or dissertation on the basis of which a degree or award was conferred on an earlier occasion on this or any other candidate.

IMPORTANCE OF THE TOPIC SELECTED

The money we earn is partly spent and the rest is saved for meeting future expenses. Instead of keeping the saving idle we may like to earn some returns on it. So, we try to invest the money to earn good returns along with to generate a specified some of money for a specific goal in life and also make a provision for uncertain future. Their a number of options for investing ones saving which can give better returns for their investments made in physical assets or financial assets which may be further divided into short or long term options. Investing money where the risk is less has always been risky to decide. The first factor, which an investor would like to see before investing, is risk factor, which can be reduced through diversification of the risk. Diversification of risk gave birth to the phenomenon called Mutual Fund. Mutual fund is a vehicle for investing in stocks and bonds. It is not an alternative investment option to stocks and bonds, rather it pools the money of several investors and invest their savings in stocks, bonds, money market instruments and other type of securities.

OBJECTIVES OF THE PROJECT

To provide basic about investments. To know the information about various investment options. To study the nature of investment. To study about Mutual funds. To study how Mutual funds can be a better option. To study how diversification can help in risk reduction. To study managing efficiently cal lead to generate or yield higher returns.

TYPES OF MUTUAL FUNDS SCHEMES IN INDIA

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk tolerance and return expectations etc. thus mutual funds has Variety of flavors, Being a collection of many stocks, an investors can go for picking a mutual fund might be easy. There are over hundreds of mutual funds scheme to choose from. It is easier to think of mutual funds in categories, mentioned below. BY STRUCTURE Open - Ended Schemes: An open-end 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-end schemes is liquidity. Close - Ended Schemes: These schemes have a pre-specified maturity period. One can invest directly in the scheme at the time of the initial issue. Depending on the structure of the scheme there are two exit options available to an investor after the initial offer period closes. Investors can transact (buy or sell) the units of the scheme on the stock exchanges where they are listed. The market price at the stock exchanges could vary from the net asset value (NAV) of the scheme on account of demand and supply situation, expectations of unit holder and other market factors. Alternatively some close-ended schemes provide an additional option of selling the units directly to the Mutual Fund through periodic repurchase at the schemes NAV; however one cannot buy units and can only sell units during the liquidity window. SEBI Regulations ensure that at least one of the two exit routes is provided to the investor. Interval Schemes: Interval Schemes are that scheme, which combines the features of open-ended and close-ended schemes. The units may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV related prices. BY NATURE Equity fund: These funds invest a maximum part of their corpus into equities holdings. The structure of the fund may vary different for different schemes and the fund managers outlook on different stocks. The Equity Funds are sub-classified depending upon their investment objective, as follows: Diversified Equity Funds Mid-Cap Funds Sector Specific Funds Tax Savings Funds (ELSS)

Debt funds: The objective of these Funds is to invest in debt papers. Government authorities, private companies, banks and financial institutions are some of the major issuers of debt papers. By investing in debt instruments, these funds ensure low risk and provide stable income to the investors. Debt funds are further classified as: Gilt Funds: Invest their corpus in securities issued by Government, popularly known as Government of India debt papers. These Funds carry zero Default risk but are associated with Interest Rate risk. These schemes are safer as they invest in papers backed by Government. Income Funds: Invest a major portion into various debt instruments such as bonds, corporate debentures and Government securities. MIPs: Invests maximum of their total corpus in debt instruments while they take minimum exposure in equities. It gets benefit of both equity and debt market. These scheme ranks slightly high on the risk-return matrix when compared with other debt schemes. Short Term Plans (STPs): Meant for investment horizon for three to six months. These funds primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs). Some portion of the corpus is also invested in corporate debentures. Liquid Funds: Also known as Money Market Schemes, These funds provides easy liquidity and preservation of capital. These schemes invest in short-term instruments like Treasury Bills, inter-bank call money market, CPs and CDs. These funds are meant for short-term cash management of corporate houses and are meant for an investment horizon of 1day to 3 months. These schemes rank low on risk-return matrix and are considered to be the safest amongst all categories of mutual funds.

Balanced funds: As the name suggest they, are a mix of both equity and debt funds. They invest in both equities and fixed income securities, which are in line with predefined investment objective of the scheme. These schemes aim to provide investors with the best of both the worlds. Equity part provides growth and the debt part provides stability in returns. BY INVESTMENT OBJECTIVE: Growth Schemes: Growth Schemes are also known as equity schemes. The aim of these schemes is to provide capital appreciation over medium to long term. These schemes normally invest a major part of their fund in equities and are willing to bear short-term decline in value for possible future appreciation. Income Schemes: Income Schemes are also known as debt schemes. The aim of these schemes is to provide regular and steady income to investors. These schemes generally

invest in fixed income securities such as bonds and corporate debentures. Capital appreciation in such schemes may be limited. Balanced Schemes: Balanced Schemes aim to provide both growth and income by periodically distributing a part of the income and capital gains they earn. These schemes invest in both shares and fixed income securities, in the proportion indicated in their offer documents (normally 50:50). Money Market Schemes: Money Market Schemes aim to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer, short-term instruments, such as treasury bills, certificates of deposit, commercial paper and inter-bank call money. OTHER SCHEMES Tax Saving Schemes: Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate. Index Schemes: Index schemes attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only those stocks that constitute the index. The percentage of each stock to the total holding will be identical to the stocks index weightage. And hence, the returns from such schemes would be more or less equivalent to those of the Index. Sector Specific Schemes: These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time.

RESEARCH METHODOLOGY RESEARCH PROBLEM: A Comparative Study Of Mutual Funds With Other Investment Options RESEARCH DESIGN: Exploratory SAMPLE SIZE: 60 SAMPLING TECHNIQUE: Quota Sampling DATA COLLECTION METHOD: Primary And Secondary Data

QUESTION 1 AGE Above 60 51 to 60 41 to 50 30 to 40 Less than 30

2% 2% 15% 48% 1 2 33% 3 4 5

QUESTION 2 Describe your financial status in terms of savings 1. Just manage to make ends meet with negligible savings 2. Save less than 10% of the income 3. Save around 10% to 20% of the income 4. Save around 20% to 30% of your income 5. Save more than 30% of the income

33% 35% 30% 25% 20% 15% 10% 5% 0% 1 2 3 4 5 7% 22% 15% 23%

QUESTION 3 Your present job or business is? 1. Not very dependable 2. Is fairly dependable 3. Is secure 4. Doesnt matter since you have enough wealth accumulated 5. Doesnt matter as you can easily find another source of income
43% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 1 2 3 4 5 2% 10% 18% 27%

QUESTION 4 Which investments are you more comfortable with? 1. Are stable but protect against losses even if it means low returns 2. Have little risk of short term loss but offer some opportunity of long term growth 3. Have moderate risk of short term loss but offer moderate opportunity of long term growth 4. Have higher risk of short term loss but offer very high opportunity of long term growth

40% 35% 30% 25% 20% 15% 10% 5% 0% 1

37% 33%

22%

8%

QUESTION 5 Given below is a list of investmnet options from least risky to most risky. Which is the option you would invest into? 1. Fixed Deposits, Bonds and Money Market Funds 2. Debt/Hybrid Mutual Funds 3. Equity Mutual Funds 4. Individual Shares 5. Private Equity/Venture Capital Funds/Lend to Businessmen

35% 30% 25% 20% 15% 10% 5% 0% 1

30%

32%

18% 10% 10%

QUESTION 6 Incase of a financial meltdown, your portfolio losses money over the year. How long are you willing to wait for your money to recover? 1. Less than 1 year 2. 1-2 years 3. 2-3 years 4. 3-5 years 5. More than 5 years
45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 42%

27% 15%

12% 5%

QUESTION 7 Herewith mentioned are five hypothetical investment scenarios. Which of these is the most favourable? 1. Avg Return: 7% Best Case Return: 16% Worst Case Return: -6% 2. Avg Return: 9% Best Case Return: 25% Worst Case Return: -12%

3. Avg Return: 10% Best Case Return: 33% Worst Case Return: -18% 4. Avg Return: 12% Best Case Return: 42% Worst Case Return: -24% 5. Avg Return: 14% Best Case Return: 50% Worst Case Return: -28%
28% 30% 25% 20% 15% 8% 10% 5% 0% 1 2 3 4 5 12% 22% 30%

QUESTION 8 While making an investment decision, which is most important to you 1. Capital Protection 2. Current Income 3. Maintaining a Balance 4. Long Term Wealth Creation
37% 40% 35% 30% 25% 20% 15% 10% 5% 0% 1 2 3 4 10% 25% 28%

INVESTMENT IN MUTUAL FUNDS

FINDINGS & SUGGESTIONS

Mutual funds industry is enlarging its size in India. Number of investors is rising, and number of AMCs is going up. These changes are likely to happen. Private sector is aggressively participating in mutual funds business. Numbers of schemes are much more than earlier. This situation pushes investors back from investment. They wait and hold cash rather than investing. This study found that investors are willing to invest with high rate of return.

BIBLIOGRAPHY
Books Wealth Management: The Financial Advisor's Guide to Investing and Managing Client Assets, Harold Evensky Global Private Banking and Wealth Management: The New Realities (The Wiley Finance Series), David Maude Links http://www.mutualfundsindia.com http://www.amfiindia.com/ http://en.wikipedia.org/wiki/Wealth_management http://www.moneycontrol.com/stocksmarketsindia/