Comparative Study between Direct Investment in Equity and through Mutual Fund And ETF

OBJECTIVES OF THE STUDY:1) The main purpose is to study whether mutual fund is investors preference or not. 2) To make a study of various investment schemes in the secondary market. 3) To compare mutual funds and ETF investment with Direct Investment 4) To study and Compare how various schemes affect mutual fund investment and its performance taking past records.

SCOPE OF MUTUAL FUNDS IN INDIA:Scope of Mutual Funds has grown enormously over the years. Earlier when the investment management companies started to offer mutual funds, choices were few. Even though people invested their money in mutual funds as these funds offered them diversified investment option for the first time. By investing in these funds they were able to diversify their investment in common stocks, preferred stocks, bonds and other financial securities. At the same time they also enjoyed the advantage of liquidity with Mutual Funds and they got the scope of easy access to their invested funds on requirement. In recent years the scope of Mutual Funds has become so wide, that people sometimes take long time to decide the mutual fund type and they are going to invest in several Investment Management. Companies over the years offer various types of Mutual Funds and each type carry unique characteristics and features. Some of the Choices provided by Mutual Funds are as the follows: o Equity Funds - These types of Mutual Funds generally invest in stocks which are publicly traded. Amount of risk, involved with these funds vary according to different types of Equity Funds. o Growth Funds-These funds invest in the stocks, which are undervalued as compared to their worth. As this stock price tends to rise in future
1|Page

and carry good growth potential, Growth Funds go for these kinds of stocks. o Global Equity Funds-These funds invest in stocks of both the domestic market and the foreign markets. o Value Funds - These funds go for long term investment and aims at increase of value over the years. o International Equity Funds - These funds invest in the stocks of foreign companies. o Sector Funds or Specialty Funds-These funds invest in specific sectors like Health care and in specific commodities like Gold. o Index Funds-These funds reflect the performance of stock market indexes. o Bond Funds- These funds invest in government bonds and corporate bonds. These Bond Funds offer a steady source of income and in many times these incomes get the advantage of Tax Exemption. o Money Market Funds - These funds invest in the money market. These funds involve low level of risk and promises comparatively low rate of return. o Balanced Fund- These funds invest both in Stocks and Bonds and thus offer a well diversified investment portfolio.

Some of the Companies that Provide Mutual Fund: ICICI Mutual Fund UTI Mutual Fund HDFC Mutual Fund Kotak Mutual Fund

2|Page

Exchange Traded Funds (ETF) :Exchange Traded funds (ETFs) are baskets of securities that are traded, like individual stocks, through a brokerage firm on a stock exchange. Shares of ETFs are traded with other investors who are also going through brokerage firms to facilitate their transactions. All- day trading makes ETFs more flexible than their familiar sister open-end mutual funds, where investors must wait until the end of the day to buy or sell shares directly with a mutual fund company. ETFs can be bought and sold throughout the trading day whenever the stock exchanges are open. Anyway you can trade a stock you can trade an ETF. Shares can also be sold short or bought on margin. That makes these investment vehicles useful for institutional investors and traders who often need to hedge equity positions quickly.

Difference Between ETF and Mutual Fund:ETFs Trade during trading day Low operating expenses No investment minimums Tax-efficient No sales loads Mutual Funds Trade at closing NAV Operating expenses vary Most have investment minimums Less tax-efficient May have sales load

3|Page

Bibliography:The ETF Book by Richard A. Ferri, CFA Investopedia

4|Page