topic

Investor preferences towards mutual funds with references to Swastika

Investment

Contents

1. Introduction

Industry Profile
Companys profile
Structure of organisation

2. Major Learning

3. SWOT Analysis of Company

4. Recommendations

5. References

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INTRODUCTION

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 INTRODUCTION TO THE TOPIC

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 as important 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 as an investment option 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.

MEANING OF MUTUAL FUNDS

Mutual fund is a trust that pools the savings of a number of investors who share a common
financial goal. This pool of money is invested in accordance with a stated objective. The joint
ownership of the fund is thus Mutual, i.e. the fund belongs to all investors. 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 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. A Mutual Fund is an investment tool that allows small investors access to
a well-diversified portfolio of equities, bonds and other securities. Each shareholder

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participates in the gain or loss of the fund. Units are issued and can be redeemed as needed.
The funds Net Asset value (NAV) is determined each day.

Investments in securities are spread across a wide cross-section of industries and sectors
and thus the risk is reduced. Diversification reduces the risk because all stocks may not move
in the same direction in the same proportion at the same time. Mutual fund issues units to the
investors in accordance with quantum of money invested by them. Investors of mutual funds
are known as unit holders.

MUTUAL FUND AS AN INVESTMENT OPTION

When an investor subscribes for the units of a mutual fund, he becomes part owner of the
assets of the fund in the same proportion as his contribution amount put up with the corpus
(the total amount of the fund). Mutual Fund investor is also known as a mutual fund
shareholder or a unit holder.
Any change in the value of the investments made into capital market instruments (such as
shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is
defined as the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a
scheme is calculated by dividing the market value of scheme's assets by the total number of
units issued to the investors.

An investor normally prioritizes his investment needs before undertaking an investment.

Different goals will be allocated to different proportions of the total disposable amount.
Investments for specific goals normally find their way into the debt market as risk reduction
is of prime importance, this is the area for the risk-averse investors and here, Mutual Funds
are generally the best option. One can avail of the benefits of better returns with added
benefits of anytime liquidity by investing in open-ended debt funds at lower risk, this risk
of default by any company that one has chosen to invest in, can be minimized by investing
in Mutual Funds as the fund managers analyze the companies financials more minutely than
an individual can do as they have the expertise to do so.

Moving up the risk spectrum, there are people who would like to take some risk and invest
in equity funds/capital market. However, since their appetite for risk is also limited, they
would rather have some exposure to debt as well. For these investors, balanced funds

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 provide an easy route of investment, armed with expertise of investment techniques, they
can invest in equity as well as good quality debt thereby reducing risks and providing the
investor with better returns than he could otherwise manage. Since they can reshuffle their
portfolio as per market conditions, they are likely to generate moderate returns even in
pessimistic market conditions.

Next comes the risk takers, risk takers by their nature, would not be averse to investing in
high-risk avenues. Capital markets find their fancy more often than not, because they have
historically generated better returns than any other avenue, provided, the money was
judiciously invested. Though the risk associated is generally on the higher side of the
spectrum, the return-potential compensates for the risk attached.

Theoretical Background

IMPORTANCE OF MUTUAL FUNDS

1. A Mutual Fund actually belongs to the investors who have pooled their Funds. The
ownership of the mutual fund is in the hands of the Investors.
2. A Mutual Fund is managed by investment professional and other Service providers, who
earns a fee for their services, from the funds.
3. The pool of Funds is invested in a portfolio of marketable investments. The value of the
portfolio is updated every day.
4. The investors share in the fund is denominated by units. The value of the units changes
with change in the portfolio value, every day. The value of one unit of investment is called
net asset value (NAV).
5. The investment portfolio of the mutual fund is created according to The stated Investment
objectives of the Fund.

NEED OF MUTUAL FUNDS

Here are some of the Advantages offered by Mutual Funds-:

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Number of available options

Mutual funds invest according to the underlying investment objective as specified at the time
of launching a scheme. So, we have equity funds, debt funds, gilt funds and many others that
cater to the different needs of the investor. The availability of these options makes them a
good option. While equity funds can be as risky as the stock markets themselves, debt funds
offer the kind of security that is aimed for at the time of making investments. Money market
funds offer the liquidity that is desired by big investors who wish to park surplus funds for
very short-term periods. Balance Funds cater to the investors having an appetite for risk
greater than the debt funds but less than the equity funds.

Diversification

Investments are spread across a wide cross-section of industries and sectors and so the risk is
reduced. Diversification reduces the risk because all stocks dont move in the same direction
at the same time. One can achieve this diversification through a Mutual Fund with far less
money than one can on his own.

Professional Management

Mutual Funds employ the services of skilled professionals who have years of experience to
back them up. They use intensive research techniques to analyze each investment option for
the potential of returns along with their risk levels to come up with the figures for
performance that determine the suitability of any potential investment.

Liquidity

Mutual Funds offer the benefit of liquidity which provides the investor with the option of
easy conversion to money. As in the case of fixed deposits, where the investor can get his
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money back only on the completion of a fixed period, an investor can get his money back as
and when he wants. Investors can redeem their money at the prevailing NAVs (Net Asset
Values). Mutual funds directly re-purchase at the current NAV.

Well Regulated

Unlike the company fixed deposits, where there is little control with the investment being
considered as unsecured debt from the legal point of view, the Mutual Fund industry is very
well regulated. All investments have to be accounted for, decisions judiciously taken. SEBI
acts as a true watchdog in this case and can impose penalties on the AMCs at fault. The
regulations, designed to protect the investors interests are also implemented effectively.

Transparency

Being under a regulatory framework, mutual funds have to disclose their holdings,
investment pattern and all the information that can be considered as material, before all
investors. This means that the investment strategy, outlooks of the market and scheme related
details are disclosed with reasonable frequency to ensure that transparency exists in the
system. On the other hand, the investor is totally clueless in case of the other investment
alternatives as nothing is disclosed.

Savings

Tax saving schemes of Mutual Funds offer investor a tax rebate under section 88 of the
Income Tax Act. Under this section, an investor can invest up to Rs.10,000 per Financial year
in a tax saving scheme. The rate of rebate under this section depends on the investors total
income

Flexible and Affordable

Mutual Funds offer a relatively less expensive way to invest when compared to other avenues
such as capital market operations. The fee in terms of brokerages, custodial fees and other
management fees are substantially lower than other options and are directly linked to the
performance of the scheme. Investment in mutual funds also offers a lot of flexibility with
features such as regular investment plans, regular withdrawal plans and dividend
reinvestment plans enabling systematic investment or withdrawal of funds. Even the
investors, who could otherwise not enter stock markets with low investible funds, can benefit

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from a portfolio comprising of high-priced stocks because they are purchased from pooled
funds.