A

DISSERTATION REPORT
ON

Investment Pattern of Investor’s in

Mutual Fund & Life Insurance
“CASE STUDY OF CHANDIGARH”

SUBMITTED TO
S.L.KAUSHAL
Training and Placement Coordinater
INSTITUTE OF MANAGEMENT STUDIES
H.P.UNIVERSITY SHIMLA

UNDER THE SUPERVISION OF: SUBMITTED BY:

Haribaksh Singh (Branch Manager) Kulbir Singh
Abhishek Chadha (Relationship Manager) Roll no 2026
Rohit Goyal (Relationship Manager)

TABLE OF CONTENTS
Serial No. Contents Page No.

1. Certificate

2. Acknowledgement

3. Company Profile

• Vision

• Incorporation of company

• Corporate structure

• Capital structure

• Strategy

• Corporate governance

• Board of directors

4. Objective of the study

5. Introduction to the study

a. Investor and Investment

b. Mutual funds

c. Insurance

6. Literature Review

7. Research Methodology

2
 a. Sampling & Sample Design

b. Analytical Tools

c. Data Collection

d. Limitations of the study

8. Result & Discussions/Findings

9. Recommendation

10. Executive summary

11. Bibliography

12. Annexure

3
 Acknowledgement

Preservation, inspiration and motivation have always played a key role in the
success of any venture. In the present world of cutthroat competition project
is likely a bridge between theoretical and practical working, willingly I have
prepared this particular project.

First of all, I would like to thank the supreme power, the almighty
God who is obviously the one who has always directed me to work on the
right path of my life. With this grace this project could become a reality.

I feel highly delighted with the way my dissertation report on topic

“Investment Pattern of Investor’s in Mutual Funds & Life Insurance- A
case study of Chandigarh ” has been completed.

Any accomplishment requires the efforts of many people and this

work is not different. Firstly, I would like to extend my sincere thanks to
Haribaksh Singh (Branch Manager) INDIAINFOLINE for his co-operation
and providing me good environment to work on.

I would like to thank Abhishek Chadha and Rohit Goyal

(Relationship Manager) INDIAINFOLINE to provide me the fruitful
guidance to complete the project.

Finally, I would like to thanks all the branch employees’, respondents

and other people whom directly or indirectly help me completing the project.

4
 (Kulbir Singh)

COMPANY PROFILE
(INDIA INFOLINE LTD)
VISION

“THE VISION OF INDIA INFOLINE IS TO EMERGE AS THE MOST RESPECTED

FINANCIAL SERVICE PROVIDER IN INDIA.”

INCORPORATION OF COMPANY

Nirmal Jain, MBA (IIM, Ahmedabad) and a Chartered and Cost Accountant,
founded India’s leading financial services company India Infoline Ltd. in
1995, providing globally acclaimed financial services in equities and
commodities broking, life insurance and mutual funds distribution, among
others. Mr. Jain began his career in 1989 with Hindustan Lever’s commodity
export business, contributing tremendously to its growth. He was also
associated with Inquire-Indian Equity Research, which he co-founded in
1994 to set new standards in equity research in India.

India Infoline Limited is listed on both the leading stock exchanges in India,
viz. the Stock Exchange, Mumbai (BSE) and the National Stock Exchange
(NSE) and is also a member of both the exchanges. It is engaged in the
businesses of Equities broking, Wealth Advisory Services and Portfolio
Management Services. It offers broking services in the Cash and Derivatives
segments of the NSE as well as the Cash segment of the BSE. It is registered

5
with NSDL as well as CDSL as a depository participant, providing a one-
stop solution for clients trading in the equities market. It has recently
launched its Investment banking and Institutional Broking business

CORPORATE STRUCTURE

India Infoline Media and Research Services Limited.

6
The content services represent a strong support that drives the broking,
commodities, mutual fund and portfolio management services businesses.
Revenue generation is through the sale of content to financial and media
houses, Indian as well as global.

It undertakes equities research which is acknowledged by none other than

Forbes as 'Best of the Web' and '…a must read for investors in Asia'. India
Infoline's research is available not just over the internet but also on
international wire services like Bloomberg (Code: IILL), Thomson First Call
and Internet Securities where India Infoline is amongst the most read Indian
brokers

India Infoline Commodities Limited

India Infoline Commodities Pvt Limited is engaged in the business of

commodities broking. Our experience in securities broking empowered us
with the requisite skills and technologies to allow us offer commodities
broking as a contra-cyclical alternative to equities broking. We enjoy
memberships with the MCX and NCDEX, two leading Indian commodities
exchanges, and recently acquired membership of DGCX. We have a multi-
channel delivery model, making it among the select few to offer online as
well as offline trading facilities.

India Infoline Marketing & Services

7
India Infoline Marketing and Services Limited is the holding company of
India Infoline Insurance Services Limited and India Infoline Insurance
Brokers Limited.
(a) India Infoline Insurance Services Limited is a registered Corporate Agent
with the Insurance Regulatory and Development Authority (IRDA). It is the
largest Corporate Agent for ICICI Prudential Life Insurance Co Limited,
which is India's largest private Life Insurance Company. India Infoline was
the first corporate agent to get licensed by IRDA in early 2001.

(b) India Infoline Insurance Brokers Limited India Infoline Insurance

Brokers Limited is a newly formed subsidiary which will carry out the
business of Insurance broking. We have applied to IRDA for the insurance
broking license and the clearance for the same is awaited. Post the grant of
license, we propose to also commence the general insurance distribution
business.

India Infoline Investment Services Limited

Consolidated shareholdings of all the subsidiary companies engaged in loans

and financing activities under one subsidiary. Recently, Orient Global, a
Singapore-based investment institution invested USD 76.7 million for a
22.5% stake in India Infoline Investment Services. This will help focused
expansion and capital raising in the said subsidiaries for various lending
businesses like loans against securities, SME financing, distribution of retail
loan products, consumer finance business and housing finance business.
India Infoline Investment Services Private Limited consists of the following
step-down subsidiaries.

8
(a) India Infoline Distribution Company Limited (distribution of retail loan
products)

(b) Moneyline Credit Limited (consumer finance)

(c) India Infoline Housing Finance Limited (housing finance)

IIFL (Asia) Private Limited

IIFL (Asia) Private Limited is wholly owned subsidiary which has been
incorporated in Singapore to pursue financial sector activities in other Asian
markets. Further to obtaining the necessary regulatory approvals, the
company has been initially capitalized at 1 million Singapore dollars.

9
Products and Services

We are a one-stop financial services shop, most respected for quality of its
advice, personalised service and cutting-edge technology.

Equities

Indiainfoline provided the prospect of researched investing to its clients,

which was hitherto restricted only to the institutions. Research for the retail
investor did not exist prior to Indiainfoline. Indiainfoline leveraged
technology to bring the convenience of trading to the investor’s location of
preference (residence or office) through computerised access. Indiainfoline
made it possible for clients to view transaction costs and ledger updates in
real time.
click for more

PMS

Our Portfolio Management Service is a product wherein an equity

investment portfolio is created to suit the investment objectives of a client.
We at Indiainfoline invest your resources into stocks from different sectors,
depending on your risk-return profile. This service is particularly advisable
for investors who cannot afford to give time or don't have that expertise for
day-to-day management of their equity portfolio.
click for more

Research

10
Sound investment decisions depend upon reliable fundamental data and
stock selection techniques. Indiainfoline Equity Research is proud of its
reputation for, and we want you to find the facts that you need. Equity
investment professionals routinely use our research and models as integral
tools in their work.
They choose Ford Equity Research when they can clear your doubts.
click for more

Commodities

Indiainfoline’s extension into commodities trading reconciles its strategic

intent to emerge as a one-stop solutions financial intermediary. Its
experience in securities broking has empowered it with requisite skills and
technologies. The Company’s commodities business provides a contra-
cyclical alternative to equities broking. The Company was among the first to
offer the facility of commodities trading in India’s young commodities
market (the MCX commenced operations only in 2003). Average monthly
turnover on the commodity exchanges increased from Rs 0.34 bn to Rs
20.02 bn. The commodities market has several products with different and
non-correlated cycles. On the whole, the business is fairly insulated against
cyclical gyrations in the business.
click for more

Mortgages

During the year under review, Indiainfoline acquired a 75% stake in

Moneytree Consultancy Services to mark its foray into the business of
mortgages and other loan products distribution. The business is still in the
investing phase and at the time of the acquisition was present only in the
cities of Mumbai and Pune. The Company brings on board expertise in the
loans business coupled with existing relationships across a number of
principals in the mortgage and personal loans businesses. Indiainfoline now
has plans to roll the business out across its pan-Indian network to provide it
with a truly national scale in operations.
click for more

11
Home Loans
Get expert advice that suits your needs
Loan against residential and commercial property
Expert recommendations
Easy documentation
Quick processing and disbursal
No guarantor requirement
click for more
Personal Loans
Freedom to choose from 4 flexible options to repay
Expert recommendations
Easy documentation
Quick processing and disbursal
No guarantor requirement
click for more

Invest Online

Indiainfoline has made investing in Mutual funds and primary market so

effortless. All you have to do is register with us and that’s all. No paperwork
no queues and No registration charges.
INVEST IN MF
Indiainfoline offers you a host of mutual fund choices under one roof,
backed by in-depth research and advice from research house and tools
configured as investor friendly.
APPLY IN IPOs
You could also invest in Initial Public Offers (IPO’s) online without going
through the hassles of filling ANY application form/ paperwork.
click for more

SMS

Stay connected to the market

The trader of today, you are constantly on the move. But how do you stay
connected to the market while on the move? Simple, subscribe to India
Infoline's Stock Messaging Service and get Market on your Mobile!

12
There are three products under SMS Service:
• Market on the move.
• Best of the lot.
• VAS (Value Added Service )
click for more

Insurance

An entry into this segment helped complete the client’s product basket;
concurrently, it graduated the Company into a one-stop retail financial
solutions provider. To ensure maximum reach to customers across India, we
have employed a multi pronged approach and reach out to customers via our
Network, Direct and Affiliate channels. Following the opening of the sector
in 1999-2000, a number of private sector insurance service providers
commenced operations aggressively and helped grow the market.

The Company’s entry into the insurance sector derisked the Company from a
predominant dependence on broking and equity-linked revenues. The
annuity based income generated from insurance intermediation result in
solid core revenues across the tenure of the policy.
click for more

Wealth Mangement Service

Imagine a financial firm with the heart and soul of a two-person

organization. A world-leading wealth management company that sits down
with you to understand your needs and goals. We offer you a dedicated
group for giving you the most personal attention at every level.

13
CAPITAL STRUCTURE
as at 31.3.2007 as at 31.3.2006
A SHARE CAPITAL
Authorised
80,000,000 (Previous year - 80,000,000) Equity Shares of Rs.10 each 800,000,000 800,000,000
Issued, Subscribed and Paid Up
50,167,198 (Previous year - 45,100,851) Equity Shares of Rs.10 each 501,671,980 451,008,510
TOTAL 501,671,980 451,008,510

B RESERVESAND SURPLUS
Securities premium account
Opening balance 1,124,870,894 206,255,007
Addition during the year 658,823,520 972,256,488
Deduction during the year -53,640,601
1,783,694,414 1,124,870,894

General reserve
Opening balance 30,000,000
Addition during the year 53,000,000 30,000,000
83,000,000 30,000,000
Special Reserve 18,500,000
Employee stock options outstanding 48,375,000
Less : Deferred Employee Compensation Expenses -37,407,790
Profit and Loss Account 809,545,795 293,556,902
Minority Interest -1,050,372
Pre-aquisition profit of Moneyline Credit Pvt. Ltd. -96,469
Foreign Exchange Fluctuation Reserve -587,955
Total 2,705,022,995 1,447,377,424

14
C EQUITYSHAREWARRANTS
Equityshare warrants 44,200,000 44,200,000

D SECUREDLOANS
Overdraft fromBanks (Secured against pledgingof fixed deposits) 150,974,080 15,013,667
Overdraft fromBanks (Secured against margins&collaterals) 389,342,608 689,096,294
Loan fromOthers (Secured against pledge of shares) 913,761,198 298,462,552
Total 1,454,077,886 1,002,572,513

E UNSECUREDLOANS
1%OptionallyConvertible Bonds 100,112,631 800,900,971
Non Convertible Debentures 262,583,844
Total 362,696,475 800,900,971

PROGRESSIVE STRATEGY
At India Infoline, we expect to capitalize on this industry buoyancy through
five distinctive priorities:

1. Proximity to customers: Even as our broking is predominantly online,

we recognize that customer proximity enhances his or her trust in us on the
one hand and enables us to deliver superior services on the other. We
expanded our branch network from 175 to 560 during the year under review
for precisely this reason: to ensure that whenever our customers seek an
informed, competent and honest financial services intermediary, an India
Info line facility will never be far away.

2. Predicting precision: At India Info line, our core business lies in the
accurate prediction of the stock markets. While we must concede that
nobody can predict the performance of even a stock, sector or the overall
market with any precise consistency, we modestly claim to have
demonstrated an ability in improving the odds and, in turn, helping our
customers better theirs.

15
3. Precise execution: Today, stocks and money worth millions move in the
form of invisible bits through wires over various networks. At India Info
line, we are proud to possess cutting-edge technology that ensures that the
customers’ money and securities are always secure, transactions executed
with precision and customers receive all information support – stock quotes,
charts, trade confirmation, etc. – on a real-time basis whenever they need
them.

4. Proactive service: The goal of a service provider is to respond to a

customer’s query with speed, accuracy and efficiency. This is true at India
Infoline with a difference; this responsiveness is not a goal in itself; it
represents the originating point in our customer relationship cycle. We
recognize that it is not only important to provide all that the customer
requires, it is also critical to provide what he or she has been unable to
articulate as well. We are delighted to state that this is now an essential
feature of our corporate culture, with our trade confirmation on SMS and our
alerts on the customer's portfolio being two of a number of relevant
examples.

5. Process mastery: Six years ago, India Infoline pioneered a paradigm

shift in India’s broking industry through a voluntary reduction in brokerage
rates from 100-150 basis points to a mere 5 basis points. This inspired an
industry wide meltdown that made trading affordable for millions in the
history of India’s capital market for the very first time. As an extension, our
processes have now been perfected to not only deliver value-for-money but

16
also provide precise information as well as demonstrate superior risk control
and management – every time.
Corporate Governance
Company’s philosophy on Corporate Governance:
The India Infoline Group is committed to placing the Investor First, by continuously
striving to increase the efficiency of the operations as well as the systems and processes
for use of corporate resources in such a way so as to maximize the value to the
stakeholders. The Group aims at achieving not only the highest possible standards of
legal and regulatory compliances, but also of effective management.

BOARD OF DIRECTORS

Directors Designation

Mr. Nirmal Jain Chairman and Managing Director

R Venkataraman Executive Director

Mr. Nilesh Vikamsey Independent Director

Mr. Sat Pal Khattar Non Executive Director

Mr Kranti Sinha Independent Director

OBJECTIVE OF THE STUDY

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The main objective of the study is to find out the

investment pattern of the investors in Mutual fund and Life

insurance. To determine what factors influence them while

they choose a particular investment ,a particular company

and in which particular scheme they prefer to invest and to

find out whether they are satisfied with their investment

decision or not

INTRODUCTION TO THE STUDY

Investor
An investor is any party that makes an Investment.

However, the term has taken on a specific meaning in finance to describe the
particular types of people and companies that regularly purchase equity or
debt securities for financial gain in exchange for funding an expanding
company. Less frequently the term is applied to parties who purchase real
estate, currency, commodity derivatives, personal property, or other assets.

18
The term implies that a party purchases and holds assets in hopes of
achieving capital gain, not as a profession or for short-term income.

Types of investors

• Individual investors (including trusts on behalf of individuals, and

umbrella companies formed for two or more to pool investment funds)

• Collectors of art, antiques, and other things of value

• Angel investors, either individually or in groups

• Venture capital funds, which serve as investment collectives on behalf

of individuals, companies, pension plans, insurance reserves, or other
funds.

• Investment banks.

• Businesses that make investments, either directly or via a captive fund

• Investment trusts, including real estate investment trusts

• Mutual funds, hedge funds, and other funds, ownership of which may
or may not be publicly traded

Investment
Investment or investing is a term with several closely-related meanings in
business management, finance and economics, related to saving or deferring
consumption. An asset is usually purchased, or equivalently a deposit is
made in a bank, in hopes of getting a future return or interest from it.

Types of investment

19
The term "investment" is used differently in economics and in finance.
Economists refer to a real investment (such as a machine or a house), while
financial economists refer to a financial asset, such as money that is put into
a bank or the market, which may then be used to buy a real asset.

Business Management

The investment decision (also known as capital budgeting) is one of the

fundamental decisions of business management: managers determine the
assets that the business enterprise obtains. These assets may be physical
(such as buildings or machinery), intangible (such as patents, software,
goodwill), or financial (see below). The manager must assess whether the
net present value of the investment to the enterprise is positive; the net
present value is calculated using the enterprise's marginal cost of capital.

Economics

In economics, investment is the production per unit time of goods, which are
not consumed but are to be used for future production. Examples include
tangibles (such as building a railroad or factory) and intangibles (such as a
year of schooling or on-the-job training). In measures of national income
and output, gross investment I is also a component of Gross domestic
product (GDP), given in the formula GDP = C + I + G + NX. I is divided
into non-residential investment (such as factories) and residential investment
(new houses). "Net" investment deducts depreciation from gross investment.
It is the value of the net increase in the capital stock per year.

20
Finance

In finance, investment is buying securities or other monetary or paper

(financial) assets in the money markets or capital markets, or in fairly liquid
real assets, such as gold, real estate, or collectibles. Valuation is the method
for assessing whether a potential investment is worth its price.

Personal Finance

Within personal finance, money used to purchase shares, put in a collective

investment scheme or used to buy any asset where there is an element of
capital risk is deemed an investment. Saving within personal finance refers
to money put aside, normally on a regular basis. This distinction is
important, as investment risk can cause a capital loss when an investment is
realized; unlike saving(s) where the more limited risk is cash devaluing due
to inflation.

In many instances the terms saving and investment are used interchangeably,
which confuses this distinction. For example many deposit accounts are
labeled as investment accounts by banks for marketing purposes. Whether an
asset is a saving(s) or an investment depends on where the money is
invested: if it is cash then it is savings, if its value can fluctuate then it is
investment.

RealEestate

In real estate, investment is money used to purchase property for the sole
purpose of holding or leasing for income and where there is an element of
capital risk. Unlike other economic or financial investment, real estate is
purchased.

21
 Broad of speaking, a person can make use of his income in three alto
natives. They are saving, investment and expenditure. If he saves more then
he will have to reduce on his expenses and vice versa. To meet the current
and future financial requirement of the person, a right combination of these
is essential. These few lines explain the importance of a right combination of
the three activities. This is what we mean by investor investment pattern &
thus comes the need of awareness initiatives for this concept.
An Investor has many objects for doing the investment some are doing
investment for security purpose some are doing for high return purpose and
some for tax benefits. Same income and age group people follow different
pattern of investment and to understand this pattern is very complex.

Researchers try to find out the investment pattern of Investor’s in Mutual

Fund & Life Insurance.

Investment objective

The options for investing our savings are continually increasing, yet every
single investment vehicle can be easily categorized according to three
fundamental characteristics - safety, income and growth - which also
correspond to types of investor objectives. While it is possible for an
investor to have more than one of these objectives, the success of one must
come at the expense of others. Here we examine these three types of
objectives, the investments that are used to achieve them and the ways in
which investors can incorporate them in devising a strategy.
 Safety
Perhaps there is truth to the axiom that there is no such thing as a

22
 completely safe and secure investment. Yet we can get close to
ultimate safety for our investment funds through the purchase of
government-issued securities in stable economic systems, or through
the purchase of the highest quality corporate bonds issued by the
economy's top companies. Such securities are arguably the best means
of preserving principal while receiving a specified
rate of return.

The safest investments are usually found in the money market and include
such securities as Treasury bills (T-bills), certificates of deposit, commercial
paper or bankers' acceptance slips; or in the fixed income (bond) market in
the form of municipal and other government bonds, and in corporate bonds.
The securities listed above are ordered according to the typical spectrum of
increasing risk and, in turn, increasing potential yield. To compensate for
their higher risk, corporate bonds return a greater yield than T-bills.

 Income
However, the safest investments are also the ones that are likely to
have the lowest rate of income return, or yield. Investors must
inevitably sacrifice a degree of safety if they want to increase their
yields. This is the inverse relationship between safety and yield: as
yield increases, safety generally goes down, and vice versa.
Most investors, even the most conservative-minded ones, want some level of
income generation in their portfolios, even if it's just to keep up with the
economy's rate of inflation. But maximizing income return can be an
overarching principle for a portfolio, especially for individuals who require a
fixed sum from their portfolio every month. A retired person who requires a

23
certain amount of money every month is well served by holding reasonably
safe assets that provide funds over and above other income-generating
assets, such as pension plans.

 Growth Of Capital
This discussion has thus far been concerned only with safety and yield as
investing objectives, and has not considered the potential of other assets to
provide a rate of return from an increase in value, often referred to as a
capital gain. Capital gains are entirely different from yield in that they are
only realized when the security is sold for a price that is higher than the price
at which it was originally purchased. (Selling at a lower price is referred to
as a capital loss.) Therefore, investors seeking capital gains are likely not
those who need a fixed, ongoing source of investment returns from their
portfolio, but rather those who seek the possibility of longer-term growth.

Growth of capital is most closely associated with the purchase of common

stock, particularly growth securities, which offer low yields but considerable
opportunity for increase in value. For this reason, common stock generally
ranks among the most speculative of investments as their return depends on
what will happen in an unpredictable future. Blue-chip stocks, by contrast,
can potentially offer the best of all worlds by possessing reasonable safety,
modest income and potential for growth in capital generated by long-term
increases in corporate revenues and earnings as the company matures. Yet
rarely is any common stock able to provide the near-absolute safety and
Income-generation of government bonds.

24
Secondary Objectives

Tax Minimization
An investor may pursue certain investments in order to adopt tax
minimization as part of his or her investment strategy. A highly paid
executive, for example, may want to seek investments with favorable tax
treatment in order to lessen his or her overall income tax burden. Making
contributions to an IRA or other tax-sheltered retirement plan, such as a
401k, can be an effective tax minimization strategy.

 Marketability Liquidity
Many of the investments we have discussed are reasonably illiquid, which
means they cannot be immediately sold and easily converted into cash.
Achieving a degree of liquidity, however, requires the sacrifice of a certain
level of income or potential for capital gains. Common stock is often
considered the most liquid of investments, since it can usually be sold within
a day or two of the decision to sell. Bonds can also be fairly marketable, but
some bonds are highly illiquid, or non-tradable, possessing a fixed term.
Similarly, money market instruments may only be redeemable at the precise
date at which the fixed term ends. If an investor seeks liquidity, money
market assets and non-tradable bonds aren't likely to be held in his or her
portfolio.
In brief, choosing a single strategic objective and assigning weightings to
all other possible objectives is a process that depends on such factors as the
investor's temperament, his or her stage of life, marital status, family
situation, and so forth. Out of the multitude of possibilities out there, each

25
investor is sure to find an appropriate mix of investment opportunities. You
need only be concerned with spending the appropriate amount of time and
effort in finding, studying and deciding on the opportunities that match your
objectives.

WHAT IS A MUTUAL FUND?

A Mutual Fund is a trust that pools the savings of a number of investors who
share a common financial goal. The money thus collected is then invested in
capital market instruments such as shares, debentures and other securities.
The income earned through these investments and the capital appreciations
realized are shared by its unit holders in proportion to the number of units
owned by them. Thus a Mutual Fund is the most suitable investment for the
common man as it offers an opportunity to invest in a diversified,
professionally managed basket of securities at a relatively low cost.

26
TYPES OF MUTUAL FUNDS
BY STRUCTURE
• Open-Ended Schemes
• Close-Ended Schemes
• Interval Schemes
BY INVESTMENT OBJECTIVE
• Growth Schemes
• Income Schemes
• Balanced Schemes
• Money Market Schemes
OTHER SCHEMES
• Tax Saving Schemes
• Special Schemes
Index Schemes
Sector Specific Schemes

Features that investors like in Mutual Fund

27
If mutual funds are emerging as the favorite investment vehicle,
it is because of the many advantages they have over other forms
and avenues of investing, particularly for the investor who has
limited resources available in terms of capital and ability to carry
out detailed research and market monitoring. The following are
the major advantages offered by mutual funds to all investors.

♦ Portfolio diversification : Mutual Funds normally invest

in a well-diversified portfolio or securities. Each investor
in a fund is a part owner of all of the fund’s assets. This
enables him to hold a diversified investment portfolio even
with a small amount of investment that would otherwise
require big capital.

♦ Professional management ; Even if an investor has a

big amount of capital available to him, he lacks the
professional attitude that is generally present in the
experienced fund manager who, ensures a much better
return than what an investor can manage on his own. Few
investors have the skills and resources of their own to
succeed in today’s fast moving, global and sophisticated
markets.

♦ Reduction/ diversification of risk : An investor in a

mutual fund acquires a diversified portfolio, no matter how
small his investment. Diversification reduces the risk of
loss, as compared to investing directly in one or two shares
or debentures or other instruments. When an investor
invests directly, all the risk of potential loss is his own. A

28
 fund investor also reduces his risk in another way. While
investing in the pool of funds with other investors any loss
on one or two securities is also shared with other investors.
This risk reduction is one of the most important benefits of
a collective investment vehicle like the mutual fund.

♦ Reduction of transaction costs : What is true of risk is

also true of the transaction costs. A direct investor bears all
the costs of investing such as brokerage or custody of
securities. When going through a fund, he has the benefit of
economies of scale; the funds pay lesser costs because of
larger volumes, a benefit passed on to its investors.

♦ Liquidity: Often, investors hold shares or bonds they

cannot directly, easily and quickly sell. Investment in a
mutual fund, on the other hand, is more liquid. An investor
can liquidate the investment by selling the units to the fund
if open-end, or selling them in the market if the fund is
closed-end, and collect funds at the end of a period
specified by the mutual fund or the stock market.

♦ Convenience and flexibility : Mutual fund management

companies offer many investor services that a direct market
investor cannot get. Investors can easily transfer their
holdings from one scheme to the other, get updated market
information

But roses have thorns as well …

29
 While the benefits of investing through mutual funds far
outweigh the disadvantages, an investor and his advisor will do
well to be aware of a few shortcomings of using the mutual funds
as investment vehicles.

♦ No Control over Costs : an investor in a mutual fund

has any control over the overall cost of investing. He pays
investment management fees as long as he remains with the
fund, albeit in return for the professional management and
research. Fees are usually payable as a percentage of the
value of his investments. Whether the fund value is rising
or declining. A mutual fund investor also pays fund
distribution costs, which he would not incur in direct
investing. However, this shortcoming only means that there
is a cost to obtain the benefits of mutual fund services.
However, this cost is often less than the cost of direct
investing by the investors.

♦ No Tailor-made Portfolios : Investors who invest on

their own can build their own portfolios of shares, bonds
and other securities. Investing through funds means he
delegates this decision to the fund managers. The very
high-net-worth individuals or large corporate investors may
find this to be a constraint in achieving their objectives.
However. Most mutual funds help investors overcome this
constraint by offering families of schemes-a large number
of different schemes – within the same fund. An investor

30
 can choose from different investment plans and construct a
portfolio of his choice.

♦ Poor Reach : Lack of deeper distribution networks and

channels is hurting the growth of the industry. This is an
area of concern for the MF industry, which has not been
able to penetrate deeper into the country and has been
limited to few metros.

♦ Banks still dominate : The biggest hindrance to the

growth of the mutual fund industry lies in its inability to
attract the savings of the public, which constitutes the
major source of investment in the other developed
countries. A large pool of money in the savings in India is
still with the state –run and private banks.

The structure and organization of Mutual Funds as per

SEBI guidelines is as follows:

31
(a) Sponsor
Sponsor is the company which sets up the Mutual Fund e.g. Kothari Pioneer
Mutual Fund have sponsor Pioneer Investment Management, Inc., USA and
the Investment Trust Of India Ltd. (ITI). The Investment Trust Of India
(Pvt.) Ltd. was established in 1946 and is one of the India well known
Financial Services Companies. To promote the Mutual Fund, the sponsor
has to meet the criteria laid down by SEBI. The criteria broadly deal with
sufficient experience, net worth, and past record in terms of fair dealing &
integrity. Those who qualify these criteria are permitted by SEBI to setup
Mutual Funds.

(b) Asset Management Company (AMC)

32
AMC manages the funds of various Schemes: AMC employs a large number
of professional for investment and research. It plays a key role in the running
of a Mutual Fund and it operates under the supervision and guidance of the
trustee. For example, Kothari Pioneer AMC Ltd. has been appointed as the
investment manages Kothari Pioneer Mutual Fund and operates its various
schemes under the provisions of the investment Management Agreement
entered into with Kothari Pioneer Mutual Fund on July 29,1993. The AMC
can be a private or public limited company either listed or not. The AMC
may be a new or existing, should have a minimum 40 percent stake paid up
in the paid-up equity of the AMC to be set up the sponsor. The minimum net
worth of the AMC is stipulated at Rs. 5 crore. The Memorandum and
Articles Of Association of the AMC Company should have the approval of
SEBI. AMC is authorized to do business, if the following condition of SEBI
are fulfilled.

(1) AMC, which are already existing, should have a sound track record,
general reputation and fairness in all other business transactions.

(2) The directors of AMC should be persons of high repute and standing
having at least 10 years of professional experience in the relevant
fields such as portfolio management, investment analysis, and in
financial administrator.

(3) At least 50 percent of the Board of AMC should be independent

director not connected with sponsoring organization.

33
 (4) The AMC should at all times have a minimum net worth of Rs. 5
crore.

Except in the case of Bank sponsored AMC where the Prior concurrence of
RBI is required. SEBI may withdraw the authorization granted to any AMC,
if it is not serving in the interest of investors. The board of trustees, of a
Mutual Fund, will appoint another AMC or liquidate the Mutual Fund as
may be necessary with in there months of withdrawal.

(c) Trustee
The trustees are an important link in the working of a Mutual Fund. Trustees
are people with long experience and who have earned a name for themselves
for integrity and excellence in their fields. It is the responsibility of the
trustees to see that AMC always act in the best interest in the investors. Thus
they carry the crucial responsibility of safe guarding the interest of the
investors. They do this by constant monitoring of the operations of the
scheme. AMC supplies all information demanded by trustees on a regular
basis i.e. quarterly.

Establishing a separate trust company should carry out trusteeship functions.

At least 50 percent of the Board of Trustee shall be independent and should
not have any affiliation with the sponsoring institution or any of its
subsidiaries. The trustees have to submit a six monthly report to the SEBI
and an annual report to the investors in the fund.

34
(d) Custodian
The SEBI while granting the authorization for setting up of a Mutual Fund,
would also approve the custodian as part of the package. The custodian
should be different from the AMC. The sponsor and trustee companies
cannot act as custodian. If the sponsor has a custodian division, it can act for
other Mutual Fund not set up by the sponsor. The approval of any agency as
custodian would depend upon its track record, experience, and qualify of
service, computerization and other infrastructure facilities. The approval of
Mutual Fund involves the approval of sponsor, AMC, trustee and custodian
all together, who are responsible for the management of fund. Each scheme
floated by Mutual Fund should have prior registration with SEBI. The AMC
should prepare a proportion/letter of offer for each to decide the proposal
within 30 days of its receipt, filing within SEBI before inviting public. SEBI
has to decide the proposal within 30 days of its receipt, failing which SEBI
clearance is presumed. Mutual Funds are allowed to start and operate both
open-ended and close-ended schemes.

History of the Indian Mutual Fund Industry

The mutual fund industry in India started in 1963 with the formation of Unit
Trust of India, at the initiative of the Government of India and Reserve Bank
the. 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 de-linked from the RBI and the Industrial Development Bank of

35
India (IDBI) took over the regulatory and administrative control in place of
RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end
of 1988 UTI had Rs.6, 700 crores of assets under management

Second Phase – 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by
public sector banks and Life Insurance Corporation of India (LIC) and
General Insurance Corporation of India (GIC). SBI Mutual Fund was the
first non- UTI Mutual Fund established in June 1987 followed by Canbank
Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian
Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda
Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while
GIC had set up its mutual fund in December 1990.
At the end of 1993, the mutual fund industry had assets under management
of Rs.47, 004 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 Fund
Regulations came into being, under which all mutual funds, except UTI were
to be registered and governed. The erstwhile Kothari Pioneer (now merged
with Franklin Templeton) was the first private sector mutual fund registered
in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more
comprehensive and revised Mutual Fund Regulations in 1996. The industry
now functions under the SEBI (Mutual Fund) Regulations 1996.

36
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 assets under management was way ahead of
other mutual funds.

Fourth Phase – since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963
UTI was bifurcated into two separate entities. One is the Specified
Undertaking of the Unit Trust of India with assets under management of
Rs.29,835 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 under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and
LIC.
It is registered with SEBI and functions under the Mutual Fund Regulations.
With the bifurcation of the erstwhile UTI which had in March 2000 more
than Rs.76,000 crores of assets under management and with the setting up of
a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and
with recent mergers taking place among different private sector funds, the
mutual fund industry has entered its current phase of consolidation and
growth. As at the end of September, 2004, there were 29 funds, which
manage assets of Rs.153108 crores under 421 schemes.

37
The graph shows the growth of assets under
management over the years

What is Insurance?
Insurance, in law and economics, is a form of risk management primarily
used to hedge against the risk of a contingent loss. Insurance is defined as
the equitable transfer of the risk of a potential loss, from one entity to
another, in exchange for a premium. Insurer, in economics, is the company

38
that sells the insurance. Insurance rate is a factor used to determine the
amount, called the premium, to be charged for a certain amount of
insurance coverage. Risk management, the practice of appraising and
controlling risk, has evolved as a discrete field of study and practice.

Principles of insurance

Commercially insurable risks typically share seven common characteristics.

1. A large number of homogeneous exposure units. The vast

majority of insurance policies are provided for individual members of
very large classes. Automobile insurance, for example, covered about
175 million automobiles in the United States in 2004. The existence of
a large number of homogeneous exposure units allows insurers to
benefit from the so-called “law of large numbers,” which in effect
states that as the number of exposure units increases, the actual results
are increasingly likely to become close to expected results. There are
exceptions to this criterion. Lloyds of London is famous for insuring
the life or health of actors, actresses and sports figures. Satellite
Launch insurance covers events that are infrequent. Large commercial
property policies may insure exceptional properties for which there
are no ‘homogeneous’ exposure units. Despite failing on this criterion,
many exposures like these are generally considered to be insurable.

2. Definite Loss. The event that gives rise to the loss that is subject to
insurance should, at least in principle, take place at a known time, in a
known place, and from a known cause. The classic example is death
of an insured on a life insurance policy. Fire, automobile accidents,
and worker injuries may all easily meet this criterion. Other types of

39
 losses may only be definite in theory. Occupational disease, for
instance, may involve prolonged exposure to injurious conditions
where no specific time, place or cause is identifiable. Ideally, the time,
place and cause of a loss should be clear enough that a reasonable
person, with sufficient information, could objectively verify all three
elements.

3. Accidental Loss. The event that constitutes the trigger of a claim

should be fortuitous, or at least outside the control of the beneficiary
of the insurance. The loss should be ‘pure,’ in the sense that it results
from an event for which there is only the opportunity for cost. Events
that contain speculative elements, such as ordinary business risks, are
generally not considered insurable.

4. Large Loss. The size of the loss must be meaningful from the
perspective of the insured. Insurance premiums need to cover both the
expected cost of losses, plus the cost of issuing and administering the
policy, adjusting losses, and supplying the capital needed to
reasonably assure that the insurer will be able to pay claims. For small
losses these latter costs may be several times the size of the expected
cost of losses. There is little point in paying such costs unless the
protection offered has real value to a buyer.

5. Affordable Premium. If the likelihood of an insured event is so

high, or the cost of the event so large, that the resulting premium is
large relative to the amount of protection offered, it is not likely that
anyone will buy insurance, even if on offer. Further, as the accounting
profession formally recognizes in financial accounting standards (See

40
 FAS 113 for example), the premium cannot be so large that there is
not a reasonable chance of a significant loss to the insurer. If there is
no such chance of loss, the transaction may have the form of
insurance, but not the substance.

6. Calculable Loss. There are two elements that must be at least

estimate able, if not formally calculable: the probability of loss, and
the attendant cost. Probability of loss is generally an empirical
exercise, while cost has more to do with the ability of a reasonable
person in possession of a copy of the insurance policy and a proof of
loss associated with a claim presented under that policy to make a
reasonably definite and objective evaluation of the amount of the loss
recoverable as a result of the claim.

7. Limited risk of catastrophically large losses. The essential

risk is often aggregation. If the same event can cause losses to
numerous policyholders of the same insurer, the ability of that insurer
to issue policies becomes constrained, not by factors surrounding the
individual characteristics of a given policyholder, but by the factors
surrounding the sum of all policyholders so exposed. Typically,
insurers prefer to limit their exposure to a loss from a single event to
some small portion of their capital base, on the order of 5%. Where
the loss can be aggregated, or an individual policy could produce
exceptionally large claims, the capital constraint will restrict an
insurers appetite for additional policyholders. The classic example is
earthquake insurance, where the ability of an underwriter to issue a
new policy depends on the number and size of the policies that it has
already underwritten. Wind insurance in hurricane zones, particularly

41
 along coastlines, is another example of this phenomenon. In extreme
cases, the aggregation can affect the entire industry, since the
combined capital of insurers and reinsures can be small compared to
the needs of potential policyholders in areas exposed to aggregation
risk. In commercial fire insurance it is possible to find single
properties whose total exposed value is well in excess of any
individual insurer’s capital constraint. Such properties are generally
shared among several insurers, or are insured by a single insurer who
syndicates the risk into the reinsurance market.

Why Life Insurance?

You think twice before taking the plunge into buying insurance. Is buying
insurance a necessity now? Spending an 'extra' amount as premium at
regular intervals where you do not see immediate benefits does not seem a
necessity at the moment.

Well you could be wrong. Buying Insurance cannot be compared with

any other form of investment. Insurance gives you a life long benefit and the
returns will definitely come but only when you need it the most i.e. at the
right time. Besides buying insurance early in life is one of the wise decisions
you could take. Because the premium you would be paying would be
comparatively lower.

Insurance is not about how much more it can offer you when the stock
market is at its peak. It may not be an attractive investment option. But
weigh the pros and cons and consider how much more it offers at a small
price.

42
 Most important of all it provides you with that unique sense of
security that no other form of investment provides. It gives you a sense of
financial support especially during that time of crisis irrespective of the
fluctuations in the stock market. Insurance provides for your career goals
right from your childhood years.

If the earning member of the family is no more your child's

educational needs will not suffer. In fact his higher education too will be
provided for. You need not spend sleepless nights thinking about how to
save for your child's marriage. Life Insurance will take care of that typical
once-in-a-life-time spending on marriages.

An accident or a disability may be devastating but an insurance policy

can be of utmost support for the family during such times too. Besides it
provides for additional benefits such as bonuses. You need not worry about
your retirement years. The rising prices, taxes, and your lifestyle will be
taken care of easily. And you can relax and spend your old age in comfort
and peace.

Life insurance today plays a major role in ones life at various stages.
Considering the benefits it offers one cannot but give a thought to buying an
insurance policy at the earliest.

Need for Life Insurance

The need for life insurance comes from the need to safeguard our family. If
you care for your family’s needs you will definitely consider insurance.

43
Today insurance has become even more important due to the disintegration
of the prevalent joint family system, a system in which a number of
generations co-existed in harmony, a system in which a sense of financial
security was always there as there were more earning members.

Times have changed and the nuclear family has emerged. Apart from other
pitfalls of a nuclear family, a high sense of insecurity is observed in it today
besides, the family has shrunk. Needs are increasing with time and
fulfillment of these needs is a big question mark.

Insurance provides a sense of security to the income earner as also to the

family. Buying insurance frees the individual from unnecessary financial
burden that can otherwise make him spend sleepless nights. The individual
has a sense of consolation that he has something to fall back on.

From the very beginning of your life, to your retirement age insurance can
take care of all your needs. Your child needs good education to mould him
into a good citizen. After his schooling he needs to go for higher studies, to
gain a professional edge over the others - a necessity in this age where
cutthroat competition is the rule. His career needs have to be fulfilled.

Six tips for investing in life insurance

1. Understand Why You Need It: - While most people may need life
insurance at some point in their life, don't buy a policy just because you
heard it was a good idea. Life insurance is designed to provide families with
financial security in the event of the death of a spouse or parent. Life
insurance protection can help pay for mortgages, a college education, help to
fund retirement, provide charitable bequests and of course is a key element

44
in estate planning. In short, if others depend on your income for support, you
should strongly consider life insurance. Even if you don't have any of these
needs immediately, you still may want to consider purchasing a small
"starter" policy, if you anticipate you will have them in the future. The
reason: the younger you are, the less expensive life insurance will be.

2. Determine the Amount of Coverage You Need: - The amount of

money your family or heirs will receive after your death is called a death
benefit. To determine the proper amount of life insurance an online
calculator, like the one available at this site, can be helpful. You can also get
a ballpark figure using any number of formulas. The easiest way is to simply
take your annual salary and multiply by 8. A more detailed method is to add
up the monthly expense your family will incur after your death. Remember
to include the one-time expenses at death and the ongoing expenses such as
a mortgage or school bills. Take the ongoing expenses and divide by .
07.That indicates you'll want a lump sum of money earning approximately
7% each year to pay those ongoing expenses. Add to that amount any money
you'll need to cover one-time expenses and you'll have a rough estimate of
the amount of life insurance you need. As useful as calculators and rough
estimates are, there are some things they don't do.

They cannot provide you with any final answers. Calculators only allow you
to perform "hypothetically," recalculating and generating new results as you
make and input new assumptions. Using these tools and educating yourself
on the workings of life insurance and other financial products, however, can
help you feel more comfortable when discussing your needs with such
professionals as a New York Life agent.

45
3. Find the Right Type of Policy:-Once you've got an estimate of how
much insurance you'll need, it's time to think about the type of policy that
best fits your needs. Today life insurance comes in many varieties, but there
are four basic type’s term, whole life, universal life, and variable life. As a
first-time buyer, one will more than likely fit your needs.

.4. Look at the Quality of the Company: - An insurance policy is only as

good as the company that backs it. You want to know for certain that the company that
issues your policy will be around to service it and eventually pay the death claim. To help
you discern the strongest companies, there are several ratings agencies that rate insurance
companies on the quality of their fiscal fitness, quality of investments, and overall
financial soundness. A credit rating represents an independent assessment of the insurer's
ability to pay its claims on time and meet all its other financial obligations, the bottom
line for any life insurance company.

5. Consult an Agent: - Agents provide an invaluable service. First, an

agent can help you factor in the other "human' elements into your insurance
equations to help you determine the right amount of insurance. The
relationship you develop with an agent can last a lifetime. Second, an agent
can help you update your coverage as your needs change. They can help you
guide you through a lifetime of financial decisions, giving you one less thing
to worry about.

6. Increase Your Vocabulary: - Any discussion of insurance will

probably include words such as cash value, premium, dividends, death
benefit and more. To discuss life insurance knowledgeably, it will help to
understand the terms. Below is a brief summary of some common terms.
This site offers a complete glossary of insurance terms.

46
 Literature Review.
The literature review includes the academic books, journals, internet access,
magazines etc.

 Business Statistics by “S.P Gupta &M.P. Gupta”- The

information regarding the statistical tools and their limitations
in different fields the research is given in this section. This
section explains why to use correlation and what are the

47
 situations in which correlation can be used, and what does
correlation means.
 Research Methodology by “C.R. Kothari” The information
regarding the basics of research and research methodology ,
what are the different types of research designs, what is
problem statement, what are the sources of data collection and
what are the methods of data collection is given in this section
 Financial Management by “I.M. Pandey”- The information
regarding nature of financial management, portfolio
management, risk-return relationship,options,derivatives and
valuation of shares have been understood from this book.
 WORK BOOK by “Association Of Mutual Funda In
India”-The information about the basic knowledge and
working of mutual funds in India is taken from this book.

RESEARCH METHODOLOGY

Research is a systematic and continues method of defining a problem,

collecting the facts and analyzing them, reaching conclusion forming
generalizations.
Research methodology is a way to systematically solve the problem. It may
be understood has a science of studying how research is done scientifically.
In it we study the various steps that all generally adopted by a researcher in
studying his research problem along with the logic behind them.

48
The scope of research methodology is wider than that of research method.
Thus when we talk of research methodology we not only talk of research
methods but also consider the logic behind the method we use in the context
of our research study and explain why we are using a particular method.
So we should consider the following steps in research methodology:

 Problem statement
 Objective of study
 Research design
 Data collection
 Sample design
 Statistical tool
 Limitation of study

PROBLEM STATEMENT

The research problems, in general refers to sum difficulty with a researcher

experience in the contest of either a particular a theoretical situation and
want to obtain a salutation for same, there are so many investment options
available for the investors, how they invest or choose a particular investment
option and what factor they consider more for investing or choosing a
particular investment option and also to find out are they satisfied with their
investment decision.

49
RESEARCH OBJECTIVE

• To understand the investor pattern of investment

• To find out the difficulties of investors while investing.

• To find out that which is more popular among investor between Life

Insurance & Mutual Fund.

• To find out that are investor satisfied with their investment decision or

not.

RESEARCH DESIGN
A research design is the arrangement of the conditions for the collections
and analysis of the data in a manner that aims to combine relevance to the
research purpose with economy in procedure. In fact, the research design is
the conceptual structure within which research is conducted; it constitutes
the blue print of the collection, measurement and analysis of the data. As
search design includes an outline of what the researcher will do from writing
the hypothesis and its operational implication to the final analysis of data. I
used descriptive research design in this project.
The research design focus on the following .
o What is the study about?
o Why is the study being made?
o Where will the study be carried out?
o What type of data is required?

50
 o Where can be required data be found?
o What period of time will the study include?
o What will be sample design?
o What techniques of data collection will be used?
o How will the data be analyzed?
o In what style will the report be prepared?
DATA COLLECTION
The task of data collection is begins after a research problem has been
defined and research designed/ plan chalked out. Data collection is to gather
the data from the population. The data can be collected of two types:
 Primary data
 Secondary data
Primary data
The Primary data are those, which are collected afresh and for the first time,
and thus happened to be original in character.

Methods of collection of Primary data are as follows:

o Interview
o Questionnaire
Secondary data
The Secondary data are those which have already been collected by some
one else and which have already been passed through the statistical tool.
Methods of collection of Secondary data are Journals, Websites and books.

SAMPLE DESIGN

51
A sample design is a definite plan for obtaining a sample from a given
population. It refers to the technique or the procedure and the researcher
would adopt in selecting items of sample. Sample design may as well lay
down the number of items to be included in the sample i.e. the size of the
sample. Sample design is determined before data are collected.
Sapling area –Chandigarh
Sample Size –100
Sampling Technique - Non-Probability

52
 STATISTICAL TOOL

Introduction

In our day-to-day life, we find many examples when a mutual relationship

exists between two variables i.e. with fall or rise in the value of one variable,
the fall or rise ay take place in the value of other variable. For example, price
of a commodity rises as the demand for the commodity goes up. Upto a
certain time-period, weight of a person increases with the increase in the
age. Similarly, the temperature rises with the rise in the sunlight. These facts
indicate that three is certainly some mutual relationship that exists between
the demand for a commodity and its price, the age of a person and his
weight, and the sunlight and temperature. The correlation refers to the
statistical technique used in measuring the closeness of the relationship
between the variables.

Definition of Correlation
Some important definitions of correlation are given below:
Correlation analysis deals with the association between two or ore variables.
“Simpson and Kafka”

If two or ore quantities vary in sympathy, so that movement in one tend to

be accompanied by corresponding movements in the other, then
they are said to be correlated. “Conner”

Correlation analysis attempts to determine the degree of relationship

between variables. “Ya-Lun-Chou”

53
Spearman’s Rank Correlation Method
This method of determining correlation was propounded by Prof. Spearman
in 1984. By this method correlation between qualitative data namely beauty,
honesty, intelligence etc, can be computed. Such types of variables can be
assigned ranks but their quantitative measurement is not possible. Thus, rank
correlation method is used in such cases. The following is the formula for
the computation of rank correlation coefficient:
R = 1 - 6∑D2 or 1- 6∑D2
2
N (N -1) (N3-N)
Where R = Rank coefficient of correlation, D= Difference between two
ranks (R1-R2) N= Number of pair of observation.
The value of rank correlation always lies between –1 and +1.

This method can be studied in the following three different situations:

1. When ranks are given
2. When ranks are not given.
3. When equal or tied ranks.

54
 What are the reasons for choosing a particular company for investing in
life insurance and mutual funds?

Life Rank Mutual Rank (D=R1-R2) 2

Insurance R1 Fund R2
Agent 7 3 12 3 0
Brand name 37 1 33 1 0
Track record 19 2 30 2 0
∑D2=0

R = 1 - 6∑D2 or 1- 6∑D2
2
N (N -1) (N3-N)

1- 6.0 =1
(33-3)
Hence there is a complete agreement in the order of ranks and the ranks are
in same direction.

55
LIMITATIONS

In every research there are chances of errors and constraints. I have found
following limitations in my study.
 Sample size, which I have taken, is very small, on the basis of which
efficient decision can’t be taken.
 Respondents were biased in their responses because they were more in
favor of the brand they were using.
 Co-operation from respondents, this was the major problem.
 Most of the people were at their work. So they did not have enough
time to give all replies.
 The population surveyed was not open to questions related to their
personal income i.e. either they fell hesitant in disclosing the facts
about their incomes or they were simply not interested.
 The respondents were not in the favor to disclose their address and
contact number because they believed that they would be contacted
through telemarketing.

56
 Results and Discussions/Findings
Q:Do you invest?
100
90
80
No. of responses

70
60
50
40
30
20
10
0
Yes No
Response

Q: If not, what is the reason for that?

8
7
No. of responses

6
5
4
3
2
1
0
Lack of Lack of interest Inadequate funds
knowledge
Reasons

57
Q:What do you perceive first while investing?

45
40 Saving
No. of responses

35
High returns
30
25 Tax benefits
20
15 Security
10
High returns&Tax
5
benefits
0 Saving&Tax
1 benefits
Perception

Q: Do you invest in LIFE INSURANCE or MUTUAL

FUNDS?

50
45
40
35
No of responses

30
25
20
15
10
5
0
Life Insurance Mutual Funds Both

58
Q: What are the reasons for investing in LIFE
INSURANCE?

30
Security
25
No. of responses

Saving
20
Tax benefits
15

10 Security&Tax
benefits
5 Saving&Tax
benefits
0
1
Reasons

Q:Give the name of company you prefer for investing in

LIFE INSURANCE?

35

30
No.of responses

25 ICICI Prudential
LIC
20
Birla Sunlife
15
Reliance Insurance
10 Others

0
1
Company

59
Q:What are the reasons for choosing a particular
company for life insurance?

40
35
30
No.of responses

25
20
15
10
5
0
Agent Brand name Track record
Reason

Q:In which plan do you invest your money in LI?

35

30
No. of responses

25

20

15

10

0
Money back Endowment plan ULIPS
Scheme

60
Q:Are you satisfied with your decision of investing in
LI?

60

No. of responses 50

40

30

20

10

0
Highly satisfied Satisfied Moderate

Q:What are the reasons for investment in Mutual

Fund?

Tax benefits
30

25
High returns
No. of responses

20

15 Diversified portfolio

10
Saving
5

0 High
1 returns&Diversified
portfolio
Reasons
Tax benefits&Saving

61
Q:Which company do you prefer for investing in MF ?

40
35
No. of responses

30
UTI MF
25 Birla Sunlife MF
20 Prudential ICICI
15 Reliance MF
Others
10
5
0
1
Name of company

Q: What are the reasons for choosing a particular

company?

35

30
No. of responses

25

20

15

10

0
Agent Brand name Track record
Reasons

62
Q: In which scheme do you invest?

45
40

No. of responses
35
Equity
30
Balanced
25
Income
20
Sector specific
15
Tax saving
10
5
0
1
Scheme

Q:Are you satisfied with your decision of investing in

MF?

60

50
No. of responses

40

30

20

10

0
Highly satisfied Satisfied Moderate
Satisfaction level

63
 RECOMMENDATIONS

• Investors should make the investment with proper planning

keeping in mind their investment objectives.
• Investors should read the offer document carefully before
investing in any scheme of the mutual funds and life
insurance.
• Investors should also consults the brokers or agents to seek
information and advice but their decision should not merely
be based on agents advice rather the decision should be based
on their careful investigation.
• The investors should select a particular investment option on
basis of their need and risk tolerance.
• The investors should diversify their investment portfolio in
order to reduce the risk.
• The investors should continuously monitor their investments.
• The companies should provide all relevant information to the
investors.

64
 EXECUTIVE SUMMARY

Management ideas without any action based on them mean nothing. That is

why practical experience is vital for any management studies. Theoretical

studies in the class room are not sufficient to understand the functioning

climate and the real problems coming in the way of management. So,

practical exposures are indispensable to such courses. Thus, practical

experience acts as a supplement to the classroom studies.

This report deals with “Investment Pattern of Investor’s in Mutual

Fund & Life Insurance- A case study of Chandigarh” has been completed. I
have learnt a lot of new things which could never been learnt from theory
classes.

Main objectives of this project is to find out the investment pattern of

investor’s in Mutual Fund & Life Insurance, to find out what factors

influence them more to choose a particular investment option, particular

company & to find out whether they are satisfied with their investment

decision or not.

In this study I used non-probability sampling technique and collected

data from primary and secondary source. In this study descriptive research

design is used. Area of study is Chandigarh. It is find out that out of 100

people 89 invest their money while 11 do not invest at all because of

65
inadequate funds, lack of interest and lack of knowledge. Majority of people

invest their money in both Mutual Funds & Life insurance .Majority of

people take the investment decision on the basis of brand name and track

record and are satisfied from their decision.

66
 BIBLIOGRAPHY
Books:-

 Financial Management 9th edition by “I.M. Pandey.” Vicas

publication house pvt ltd.
 Research Methodology 2nd edition by “C.R. Kothari” .New age
international publication,
 Business Statistics 14th edition by “S.P. Gupta
&M.P.Gupta.”Sultan Chand & Sons publication.

 Workbook 3rd edition May 2006 by “Association of Mutual

Funds in India.”

Websites:-

http://www.insurance.com/LifeArticles.aspx
http://www.amfiindia.com
http://www.investopedia.com/articles/basics/04/032604.asp
http://finance.indiamart.com/taxation/income_tax/tax_plan
ning.html
http://www.indiainfoline

ANNEXURE

67
 Investment Pattern of Investor’s in Mutual Fund &
Life Insurance – a Case Study of Chandigarh
Name of Investor:- Sex:- Male/Female Age(In Yrs.).
Place:-
Occupation:- Service/Business/Other
Annual Income (in Rs.)
Service………………..
Business………………
Others………………..
Investment Details:

Q:- Do you invest?

Yes No

Q:- If not, why? What is the reason for that?

Lack of Knowledge Lack of Interest

Full of Risks Inadequate Funds

Q:- What do you perceive first while investing?

Saving High Returns

Tax Benefits Security

Others

Q:-Arrange the following investment option in descending order according to your

preferences while making an investment?
Life Insurance Mutual Fund

Bank Deposits Govt. Bonds

Equity

68
Q:-Do, You invest in Life Insurance or in Mutual funds?

LI MF Both

Q: What are the reasons for investment in Life Insurance?

Security Savings

Tax benefits High Return

Others

Q:- Give the name of the company you prefer for investing in life insurance?

ICICI Prudential Life Insurance Company

Birla Sun Life Others

Q:- What are the reasons for choosing a particular company for life insurance?

Broker/Agent Brand Name

Track Record Others

Q: In which plan do you invest your money?

Money back Endowment plan

ULIPS

Q;- Are you satisfied with the overall decision of our investment in life insurance?

Highly Satisfied Satisfied

Moderate Unsatisfied

Highly Unsatisfied No Reply

Q:- What are the reasons for investment in Mutual Fund?

Tax Benefits High Return

Diversified Portfolio Saving

69
 Q:-Which company do you prefer for investing in Mutual Fund?

UTI Mutual Fund Birla Sun Life Mutual Fund

Prudential ICICI Others

Q:- What are the reasons for investing/ choosing a particular company for investing in
Mutual Fund?

Broker/Agent Brand Name

Track Record

Q: In which scheme do you invest?

Equity specific scheme Balanced scheme

Income scheme Index scheme

Sector specific scheme Tax saving scheme

Q: - Are you satisfied with your decision of investing in Mutual Fund?

Highly Satisfied Satisfied

Moderate Unsatisfied

Highly Unsatisfied

Place:
Date: Respondent Signature

70
71