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Mutual Fund (A of investmentor securities Ltd.)

Nilay patel

Vjkm institute of management and computer studies Vadu



Pro. Hetal joshi

To acknowledge is very great way to show your gratitude towards the persons who have contributed in your success in one or other way. I find words inadequate to express my gratitude to the companys Branch Manager Mr.dilip p. patel for providing me an opportunity to carry out my summer training as such a well reputed and leading stock broking company InvestMentor Securities Ltd. thanks also to companys Branch Manager Mr.Dilip patel for his

continuous guidance and supervision and support during the training period. I would also like to thank to Mr.Bhavin patel who have spared sometime and helped me out to carry on my project work successfully at the best level. I would like to thank Mr.pritesh patel who has guided me for my project work and provided encouragement through out my training period..



As a management students, we are very well know that practical Knowledge plays an important role and it is much important than theoretical syllabus. So for this purpose our college is making the programme for us so that I can get project at industrial unit Stock Broking Company is growing sector in InvestMentor securities Ltd which is running at last 20 years in this field. InvestMentor securities is pioneer in Online trading facility in this industry. We have undertake project of Organizational Study of InvestMentor securities at AHMEDABAD During the Training period I Market. I have tried our level best to prepare this report including all the points. I am sure you will acknowledge our report. have been aware about company and Stock

I know that training is for the development and enhancement of the knowledge in particular field. It can never be possible to make a mark in todays competitive era only with theoretical knowledge when industries are developing at global level, practical knowledge of administration and management of business is very important. Hence, practical study is of great importance to M.B.A. student.

With a view to expand the boundaries of thinking, I have undergone SIP at InvestMentor Securities Ltd. I have made a deliberate to collect the required information and fulfill training objective.

Welcome To InvestMentor Online

InvestMentor Securities Ltd (ISL) is a leading stock broker of Gujarat, India. ISL has a seat on India's largest stock exchange National Stock Exchange of

India ltd (NSE), Bombay Stock Exchange (BSE), Multi-Commodity Exchange (MCX) and is also an active depository participant with India's largest depository National Securities Depository Ltd (NSDL).

InvestMentor Online (IMO) is our online arm to extend our product and services from geographical barriers and to reach investors from other countries through Internet. The trading interface provides real-time streaming quotes, manages your portfolio and many more features

InvestMentor Securities Offer :

Equity, Derivatives and Commodities Broking Depository Services Online Trading Mutual Funds and IPO Online transfer of funds. NRI Services Auto pay-in of share

InvestMentor Securities Ltd (ISL) is a leading stock broker of Gujarat, India.

ISL has a seat on India's largest stock exchange-National Stock Exchange of India ltd (NSE), Bombay Stock Exchange(BSE), Multi-Commodity Exchange(MCX) and also has active membership as a Depository Participant (DP) with India's largest depository National Securities Depository Ltd (NSDL). We are located in the center of financial district and are easily accessible from any part of Gujarat state. We are a team of dedicated, experienced stock market professionals committed to deliver world-class services at the most



We are connected to the central order matching system of the NSE through a very reliable satellite based VSAT connection. This offers our clients access and ability to get real time quotes and make trades. We are proud to say that we are able to provide investors and traders a trading system that if not better is as good as that available in advanced markets like US and Japan. With Depository Participant (DP) operations, we are able to provide one-stop integrated solution to our clients? investment needs. InvestMentor was promoted by a dynamic and ambitious group of

entrepreneurs in 1995 during the period when Indian capital markets were going through an unprecedented bear market and brokerage industry was in middle of fierce competitive environment. ISL not only survived in this tough time but also firmly established itself and opened full service branches in leading cities of North Gujarat like Unjha, Kalol, Mehsana, Kadi, Palanpur within a short span of three years. ISL was among the first few to sense the opportunities that Depositories in India had to offer and became a DP with National Securities Depository Ltd in early 1999. InvestMentor is profitable on net level from very first year and has been paying dividends every year since then. We have recently deployed Computer-to-Computer Link (CTCL) to provide link to our main trading server from any remote place through a dial up or ISDN connection. With this facility already tested and verified, many independent investment firms are offering online trading access to their clients through us.

As a next step, we are actively exploring possibilities to make our trading infrastructure available worldwide through Internet. InvestMentor Online is an important step for us to reach Non-Resident Indians, a community that is a crown-jewel for modern India and also highly recognized and respected all over the world. Recent liberalization and opening up of Indian economy and

capital markets to foreign investors have resulted into a strong growth rate for Indian economy. We at InvestMentor take this as a beginning of a long-term bull market and strongly believe that today's India offers a highly competitive investment alternative for NRIs. Presence of all leading US institutional investors and multinational companies in India is a clear evidence for the future to come.

There are probably as many ways to set up a store catalog as there are sites on the web. The examples below are only an example of how your catalog/products page can appear.





ISL's Equity broking Division has an unbroken tradition of trust and performance stemming from the philosophy of providing value added broking services. As a trading cum Clearing Member of BSE, NSE, BSE F&O and

NSEF&O, the organization provides full trading and clearing services to its clients. The broking Division has extended its services beyond the standard broking practices by helping and managing decisions for its clients a service that has created unrivaled benchmark in the industry. With the onset of online trading we at ISL Broking Division exploit the potential of the internet as a powerful facilitator. As a result, the ISL Broking has achieved a true synthesis of trading and technology? with solid advice and personalized care along with the cutting edge advanced trading systems in place. We believe in fast, efficient, quality-based service with immediate execution and the timely payin and pay-out of deliveries and funds, resulting in substantial cost savings for our customers. Our services such as daily updates, immediate confirmation of trades, SMS Alerts, personalized counseling for investment/disinvestment trading with us is an enriching experience for our clients.



In these times of T+2 settlement system having a demat account linked to your trading account becomes really convenient and an attractive proposition

and that too, especially if its free. The non trading members also can avail of our depository services at very attractive rates. You receive regular account reports and an efficient services at all the times. We are the member of one of India? largest depository NSDL and the services are available at all our s branches across Gujarat. We have a team of professionals and the latest technological expertise dedicated exclusively to our Demat department and also we have some of the best NCFM trainers, apart from a large network of branches making our service quick, convenient and efficient. In fact we are prepared for the time when t+1 pay-in and pay-out becomes a reality.

This is the facility we provide to the clients who are unable to visit the office premises to give the delivery out instruction slip personally. It is one of the latest technological use for transacting the slip by sitting at ones place or office. This is not only provides the convenience of making the transaction easier but it also makes it faster.


One of the most exciting services of getting to know ones balance in the account. Just subscribe and enter your user id and password and all your account holding and transactions is just a click away.

InvestMentor Commodities is our arm to extend our Broking Services into Commodity Markets





We provide extensive guidance for investments through Mutual Funds and IPO. Our team of experts help you select the best suited Fund and IPO to investment and provide time to guidance for exit and entry.


InvestMentor is a member of following Indian Exchanges.

National Stock Exchange of India Ltd. Bombay Stock Exchange National commodity And Derivatives Exchange Multi-commodity Exchange


Angel provides following valuable advantages to its online trading customers.

Multiple exchanges on a single screen BSE, NSE, NSE F&O, MCX and NCDEX Hot keys similar to brokers terminal Streaming quotes In-depth research and technical charts Intra-day calls 24X7 back-office Auto pay-in and pay-out of shares Instant transfer of funds Highly secure and confidential


At independence the Indian economy was predominantly agrarian. Most of the population was employed in agriculture, and most of those people were very poor. Although there was considerable growth in the 1950s, the long-term rates of growth were less positive than India's politicians desired and less than those of many other Asian countries. The rate of growth improved in the 1980s. From FY 1980 to FY 1989, the economy grew at an annual rate of 5.5 percent, or 3.3 percent on a per capita basis. Industry grew at an annual rate of 6.6 percent and agriculture at a rate of 3.6 percent. A high rate of investment was a major factor in improved economic growth. Investment went from about 19 percent of GDP in the early 1970s to nearly 25 percent in the early 1980s. India, however, required a higher rate of investment to attain comparable economic growth than did most other low-income developing countries, indicating a lower rate of return on investments. Part of the adverse Indian experience was explained by investment in large, longgestating, capital-intensive projects. Private savings financed most of India's investment, but by the mid-1980s further growth in private savings was difficult because they were already at quite a high level. As a result, during the late 1980s India relied increasingly on borrowing from foreign sources.

By the 20th and the 21st century the level of savings made by the people increased tremendously. These savings were invested in some or the other modes available either for contingency purpose or to secure future. The major fields of investment were insurance , bank fixed deposits, private fixed deposits, post office savings, government securities, gold/silver, stocks, mutual funds , IPO(initial public offering), real property etc. . .


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 invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and the capital appreciation realized by the scheme is shared by its unit holders in proportion to the number of units owned by them (pro rata). 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 portfolio at a relatively low cost. Anybody with an inventible surplus of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy.

Mutual funds provide a way for people to pool their money together to create a larger fund which is looked after by a professional fund manager. This fund is then divided into equal shares, called units.

Following the stock, bond or money markets and taking advantage of the best investment opportunities is a full time job requiring a great deal of knowledge, research and in-depth analysis. Many people do not have the time or expertise to undertake this. With mutual funds, professional fund managers and analysts do all this for you. You benefit from their expertise.

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. The flow chart below describes broadly the working of a mutual fund:

Figure 1 Mutual Fund Operation Flow Chart

BENEFITS OF MUTUAL FUNDS Mutual Funds offer several benefits to an investor such as potential return, liquidity, transparency, income growth, good post tax return and reasonable safety. There are number of options available for an investor offered by a mutual fund. Before investing in a Mutual Fund an investor must identify his needs and preferences. While selecting a Mutual Fund's schemes he should consider the effect of inflation rate, diversification of investment, the time period of investment and the risk factors. There are various types of risk factors as: Market Risk Credit Risk Interest Rate Risk Inflation Risk Political Environment

A Mutual Fund is an ideal investment vehicle where a number of investors come together to pool their money with common investment goal. Each Mutual Fund with different type of schemes is managed by respective Asset Management Company (AMC). An investor can invest his money in one or more schemes of Mutual Fund according to his choice and becomes the unit holder of the scheme. The invested money in a particular scheme of a Mutual Fund is then invested by fund manager in different types of suitable stock and securities, bonds and money market instruments. Each Mutual Fund is managed by qualified professionals, who use this money to create a portfolio which includes stock and shares, bonds, gilt, money-market instruments or combination of all. Thus Mutual Fund will diversify your portfolio over a variety of investment vehicles. Mutual Fund offers an investor to invest even a small amount of money.

Mutual Funds offer several benefits to an investor that unmatched by the other investment options. The major benefits are good post-tax returns and reasonable safety, the other benefits in investing in Mutual Funds are Professional Management: Mutual Funds employ the services of experienced and skilled professionals and dedicated investment research team. The whole team analyses the performance and balance sheet of companies and selects them to achieve the objectives of the scheme
Potential Return: Mutual Funds have the potential to provide a higher return to an investor than any other option over a reasonable period of time.

Diversification: Mutual Funds invest in a number of companies across a wide cross section of industries and sectors. Liquidity: The investor can get the money promptly at the net asset value related prices from the Mutual Funds open-ended schemes. In close-ended schemes, the units can be sold on a stock exchange at the prevailing market price.
Low Cost: Investment in Mutual Funds is a less expensive way in comparison to a direct investment in capital market.

Transparency: Mutual Funds have to disclose their holdings, investment pattern and the necessary information before all investors under a regulation framework. Flexibility: Investment in Mutual Funds offers a lot of flexibility with features of schemes such as regular investment plan, regular withdrawal plans and dividend reinvestment plans enabling systematic investment or withdrawal of funds. Affordability: Small investors with low investment fund are unable to high-grade or blue chip stocks. An investor through Mutual Funds can be benefited from a portfolio including of high priced stock. Well regulated: All Mutual Funds are registered with SEBI, and SEBI acts a watchdog, so the Mutual Funds are well regulated.


Mutual funds are good investment vehicles to navigate the complex and unpredictable world of investments. However, even mutual funds have some inherent drawbacks. Understand these before you commit your money to a mutual fund. No assured returns and no protection of capital If you are planning to go with a mutual fund, this must be your mantra: mutual funds do not offer assured returns and carry risk. For instance, unlike bank deposits, your investment in a mutual fund can fall in value. In addition, mutual funds are not insured or guaranteed by any government body (unlike a bank deposit, where up to Rs 1 lakh per bank is insured by the Deposit and Credit Insurance Corporation, a subsidiary of the Reserve Bank of India). There are strict norms for any fund that assures returns and it is now compulsory for funds to establish that they have resources to back such assurances. This is because most closed-end funds that assured returns in the early-nineties failed to stick to their assurances made at the time of launch, resulting in losses to investors. Restrictive gains Diversification helps, if risk minimization is your objective. However, the lack of investment focus also means you gain less than if you had invested directly in a single security


There are many entities involved and the diagram below illustrates the organizational set up of a mutual fund:

Figure 2 Organization of a Mutual Fund

Mutual funds have a unique structure not shared by other entities such as companies or firms .The structure of mutual funds in India is governed by SEBI (Mutual Fund) Regulations, 1996. These regulations make it mandatory for mutual funds to have a three tier structure of Sponsor Trustee Asset Management Company (AMC). The sponsor is the promoter of the mutual fund and also appoints the Trustees, custodians, and the AMC with prior approval of SEBI. The sponsor establishes the mutual fund and registers the same with SEBI. Sponsor must contribute at least 40% of the capital of the AMC. The trustees are responsible to the investors in the mutual fund, and appoint the AMC on the advice of sponsors for managing the investment portfolio. The trustee of one mutual fund cannot be a trustee of other mutual fund. The trustee of one mutual fund cannot be a trustee of other mutual fund. The Indian Trust Act governs trustees. If the trustee is a

company then the Companies Act also governs it. The AMC is the business face of the mutual fund, as it manages all the affairs of the mutual fund. Only the SEBI registered AMCs can be appointed as investment managers of mutual fund. AMC must have minimum net worth of Rs. 10 crore, at all times. An AMC too cannot be an AMC or trustees of other mutual fund. TYPES OF MUTUAL FUNDS A Mutual Fund may float several schemes which may be classified on the basis of its structure, its investment objectives and other objectives.

A. MUTUAL FUND SCHEMES BY STRUCTURE Open-Ended Funds: Open-Ended fund scheme is open for subscription all through year. An investor can buy or sell the units at "NAV" (Net Asset Value) related price at any time. Close-Ended Funds: A Close-Ended fund is open for subscription only during a specified period, generally at the time of initial public issue. The Close-Ended fund scheme is listed on the some stock exchanges where an investor can buy or sell the units of this type of scheme. Interval Funds: Interval Funds combines both the features of Open-Ended funds and Close-Ended funds.


Growth Funds: The objective of Growth Fund scheme is to provide capital appreciation over the medium to long term. This type of scheme is an ideal scheme for the investors seeking capital appreciation for a long period.

Income Funds: The Income Fund schemes objective is to provide regular and steady income to investors.

Balanced Funds: The objective of Balanced Fund schemes is to provide both growth and regular income to investors.

Money Market Funds: The objectives of Money market funds are to provide easy liquidity, regular income and preservation of income.


Tax Saving Schemes: The objective of Tax Saving schemes is to offer tax rebates to the investors under specific provisions of the Indian Income Tax Laws. Investments made under some schemes are allowed as deduction u/s 88 of the Income Tax Act.

Industry specific Schemes: Industry specific schemes invest only in the industries specified in the offer document of the schemes. Sectorial Schemes: The scheme invest particularly in a specified industries or initial public offering. Index schemes: Such schemes links with the performance of BSE sensex or NSE.

Loan Funds: Loan Funds charges a commission each time when you buy or sale units in the fund. No-Loan Funds: No-Loan Funds does not charge a commission on purchase or sale of the units in the fund.

Savings form an important part of the economy of any nation. With the savings invested in various options available to the people, the money acts as the driver for growth of the country. Indian financial scene too presents a plethora of avenues to the investors. Though certainly not the best or deepest of markets in the world, it has reasonable options for an ordinary man to invest his savings. A short briefing about each form of investment is given below: BANKS Considered as the safest of all options, banks have been the roots of the financial systems in India. Promoted as the means to social development, banks in India have indeed played an important role in the rural upliftment. For an ordinary person though, they have acted as the safest investment avenue wherein a person deposits money and earns interest on it. The two main modes of investment in banks, savings accounts and fixed deposits have been effectively used by one and all. However, today the interest rate structure in the country is headed southwards, keeping in line with global trends. With the banks offering little above 9 percent in their fixed deposits for one year, the yields have come down substantially in recent times. Add to this, the inflationary pressures in economy and you have a position where the savings are not earning. The inflation is creeping up, to almost 8 percent at times, and this means that the value of money saved goes down instead of going up. This effectively mars any chance of gaining from the investments in banks. When you deposit a certain sum with the bank at a fixed rate of interest and for specified time period it is called a bank Fixed Deposit (FD). At maturity, you are entitled to receive the principal amount as well as the interest earned at the pre-specified rate during that period.
The rate of interest for Bank Fixed Deposits varies between 4 and 6 per cent, depending on the maturity period of the FD and the amount invested. The interest can be calculated

monthly, quarterly, half-yearly, or annually, and varies from bank to bank. They are one the most common savings avenue, and account for a substantial portion of an average investor's savings.

The facilities vary from bank to bank. Some services offered are withdrawal through cheques on maturity; break deposit through premature withdrawal, and overdraft facility etc.

Interest Duration p.a.) (effective 2003) 7 days to 14 days (Rs.15 lacs and above) 15 days to 45 days 46 days to 179 days 180 days to less than 1 year 1 year to less than 2 years 2 years to less than 3 years 3 years and above Source: State Bank of India

Rates 5th

(% May

4.00 4.25 5.00 5.25 5.50 5.75 6.00

Table : Interest Rates Payable on Deposits

POST OFFICE SCHEMES Just like banks, post offices in India have a wide network. Spread across the nation, they offer financial assistance as well as serving the basic requirements of communication. Among all saving options, Post office schemes have been offering the highest rates. Added to it is the fact that the investments are safe with the department being a Government of India entity. So the two basic and most sought for features, those of return safety and quantum of returns were being handsomely taken care of. Though certainly not the most efficient systems in terms of service standards and liquidity, these have still managed to attract the attention of small, retail investors. However, with the government announcing its intention of reducing the interest rates in small savings options, this avenue is expected to lose some of the investors. Public Provident Funds act as options to save for the post retirement period for most people and have been considered good option largely due to the fact that returns were higher than most other options and also helped people gain from tax benefits under various sections. This option too is likely to lose some of its sheen on account of reduction in the rates offered. Post office savings consists of National Savings Certificates: National Savings Certificates (NSC) is an assured return scheme,
armed with powerful tax rebates under Section 88 of the Income Tax Act, 1961. Interest is payable at 8 per cent, compounded half-yearly for a duration of 6 years. National Savings Scheme: National Savings Scheme (NSS) offers an assured return and tax rebates under Section 88 of the Income Tax Act, 1961. The rate of interest is 7.5 per cent per annum, compounded annually. Kisan Vikas Patra: Kisan Vikas Patra (KVP) doubles your money in 8 years and 7 months with the advantage of premature withdrawal. KVP is sold through all Head Post Offices and other authorized post offices throughout India. The rate of return is 8.41 per cent, compounded annually.

Monthly Income Scheme: The post-office monthly income scheme (MIS) provides for monthly payment of interest income to investors. It is meant for investors who want to invest a lump-sum amount initially and earn interest on

a monthly basis for their livelihood. The scheme is, therefore, a boon for retired persons. The post-office MIS gives a return of 8 per cent plus a bonus of 10 per cent on maturity. However, this 10 per cent bonus is not available in case of premature withdrawals.

Recurring Deposit: A Post-Office Recurring Deposit Account (RDA) is akin to a Recurring Deposit in a bank, where you invest a fixed amount on a monthly basis. The deposit has a fixed tenure, and the scheme is a powerful tool for regular savings. As the name says, the RDA is a systematic way of saving money. The scheme is meant for investors who want to deposit a fixed amount regularly, in order to get a tidy sum after five years. If you invest Rs 10 every month, you will get back Rs 728.90 after 5 years.

Time Deposit: A Time Deposit is an investment option that pays annual interest rates between 6.25 and 7.5 per cent, compounded quarterly, and is available through post-offices across the country.


Another often-used route to invest has been the fixed deposit schemes floated by companies. Financial institutions and Non-Banking Finance Companies (NBFCs) also accept such deposits. Deposits thus mobilized are governed by the Companies Act under Section 58A. These deposits are unsecured, i.e., if the company defaults, the investor cannot sell the company to recover his capital, thus making them a risky investment option. NBFCs are small organizations, and have modest fixed and manpower costs. Therefore, they can pass on the benefits to the investor in the form of a higher rate of interest. NBFCs suffer from a credibility crisis. So be absolutely sure to check the credit rating. AAA rating is the safest. According to latest RBI guidelines, NBFCs and companies cannot offer more than 14 per cent interest on public deposits. Companies have used fixed deposit schemes as a means of mobilizing funds for their operations and have paid interest on them. The safer a company is rated, the lesser the return offered has been the thumb rule. However, there are several potential roadblocks in these. First of all, the danger of financial position of the company not being understood by the investor lurks. The investors rely on intermediaries who more often than not, dont reveal the entire truth. Secondly, liquidity is a major problem with the amount being received months after the due dates. Premature redemption is generally not entertained without cuts in the returns offered and though they present a reasonable option to counter interest rate risk (especially when the economy is headed for a low interest regime), the safety of principal amount has been found lacking. Many cases like the Kuber Group and DCM Group fiascoes have resulted in low confidence in this option.

SHARES Shares, also called scrip, are the basic building blocks of a company. A company's ownership is determined on the basis of its shareholding. Shares are, by far, the most glamorous investment option for the simple reason that, over the long term, they offer the highest returns. Predictably, they're also the riskiest investment option. The BSE Sensex is the most popular index that tracks the movements of shares of 30 blue-chip companies on a weighted average basis. The rise and fall in the value of the Sensex, measured in points, broadly indicates the price-movement of the value of shares. Of late, technology has played a major role in enhancing the efficiency, safety, and transparency of the markets. The introduction of net trading has made it possible for an investor to trade in shares at the click of a mouse.
Types of shares A company may have many different types of shares that come with different conditions and rights. There are four main types of shares: Ordinary Shares: Ordinary shares are standard shares with no special rights or restrictions. They have the potential to give the highest financial gains, but also have the highest risk. Ordinary shareholders are the last to be paid if the company is wound up. Preference Shares: Preference shares typically carry a right that gives the holder preferential treatment when annual dividends are distributed to shareholders. Cumulative Preference Shares: Cumulative preference shares give holders the right that, if a dividend cannot be paid one year, it will be carried forward to successive years. Redeemable Shares: Redeemable shares come with an agreement that the company can buy them back at a future date. A company cannot issue only redeemable shares.

A life insurance policy is a contract between an individual (termed as insured) and an insurance company (insurer) to pay the insured, or his nominated heirs, a specified sum of money on the happening of an event. The event could be the expiry of the insurance policy or the death of the insured before the expiry (date of maturity) of the policy as per the terms of the policy.

In a simple example, a person takes an insurance policy and nominates his wife as the beneficiary. On the death of this person, his wife gets the amount for which the life insurance policy was purchased. There are many variants of a life insurance policy:

1. Whole Life Assurance Plans: These are low-cost insurance plans where the sum assured is payable on the death of the insured 2. Endowment Assurance Plans: Under these plans, the sum assured is pay-able on the maturity of the policy or in case of death of the insured individual before maturity of the policy. 3. Term Assurance Plans: Under these plans, the sum assured is payable only on the death of the insured individual before expiry of the policy. 4. Pension Plans: These plans provide for either immediate or deferred pension for life. The pension payments are made till the death of the annuitant (per-son who has a pension plan) unless the policy has provision of guaranteed period.

Life Insurance Corporation (LIC) is a government company. Till recently, the LIC was the sole provider of life insurance policies to the Indian public. However, the Insurance Regulatory & Development Authority (IRDA) has now issued licenses to a few private companies to conduct the business of life insurance.


HYPOTHESIS: Investors still prefer the traditional funds for investment instead the more modern methods like mutual fund RESEARCH OBJECTIVE To study Investment pattern of investors. Key factors to be considered before investing. Mutual funds scope and acceptance of mutual fund as means of investment as compared to other investment. TYPE OF SURVEY The questionnaire based survey is selected for conducting the research. The questionnaire based survey is selected because it is the most effective and efficient way to conduct research of investors investing in mutual fund since they just have to give their opinion for the question asked by the researcher and also they can just select from the alternatives given in the questionnaire. SAMPLING Non-Probability Sampling For the study the sampling technique used is that of Non Probability Sampling and the method is that of Convenience Sampling which represents the non probability samples

that can be restricted. Under this method there is freedom to choose whomever the researcher finds. SAMPLE SIZE The population defined for the study is any investor and into any kind of investment. The population defined would give inferences. So the population is divided here in different classes. All the professionals, service, businessmen and would include any person who make any kind of investment became my population. The sample size is approximately size is kept 100 randomly. TYPE OF QUESTIONNAIRE The questionnaire designed contained Dichotomous questions Multiple-choice questions Thus it was easy for the investors to select from the alternatives, the alternative which suits them the best. The data or the data the information collected from the respondents were the respondents were then compiled, tabulated and classified for analysis and interpretation with the use of Microsoft Excel, Microsoft Word etc. LIMITATION: Every research has certain limitation to it. So also the research conducted had certain limitation. They are stated as under: The respondents were not very much co-operative as they didnt want to disclose their level of investments. The investors of were difficult to be traced, as there was no database available for the same. People generally hesitated to answer the questionnaire thinking that the questionnaire is a way to market some particular mode of investment.

Insufficient knowledge of every kind of investment sometimes sticks a respondent at particular answer, which inversely affect towards the objective of study. At the time of survey some of the respondents are busy in their work, which had restricted them from answering. The respondents where not able to justify their stand at points and hence this proved to be a limitation of the study.



The chart represents the percentage of the income the respondents generally save. From the above chart it is clear that a large number of investors save between the range of 10 to 20% percent of their income. Nearly equal numbers of investor save less than 10%. Only 10% of the investors surveyed saved more than 30% of their income. The respondents who saved between the range of 20 to 30 % was around 21%

THE PURPOSE SAVING SERVES Contingency Secured Future Others

The chart represents the purpose for which the people make a saving. It is pretty clear from the chart that the maximum number of respondents (i.e.83%) saves to secure their future. Secure future can be anything from their childrens studies or marriage or for themselves. The next importance is given for contingency purpose. The others purpose could be tax benefits or excess money and no specific purpose. The respondents could be generally being termed as to be more concerned about the future and hence they can be termed as safe players.


This chart represents the factors that investors consider before making an investment. From the above chart it is clear that the investors take into account more than one factor before making an investment. Risk factor has been the prime concern for the investors for making an investment. 81% of the respondents consider risk as being one of the main factors to be considered before making an investment. Further the return was considered to be important for the investments. 44% respondents considered return to be an important factor whereas 14 % respondents considered liquidity to be an important factor. Risk was considered to be more important than Liquidity and Returns. The respondents gave least importance to the tenure factor. The others over here could be the past records of the investment opportunity or the goodwill of the same

PERSONS CONSULTED BEFORE MAKING AN INVESTMENT DECISION. Family and Relatives Peer Expert and Professionals Self

47 50 RESPO ND EN TS 0 F a m ily a n d R e la P e e sr s E x p e r t s a n d P r o fe s sSio n a ls tiv e e lf
This chart represents the people whose opinions are generally taken by the investors before making an investment. It is clear from the above diagram that more than one persons opinion is taken into consideration before making an investment. Maximum number of respondents consults family and relatives opinion before making an investment followed by experts and professionals. Large number of people do not consult anybody but rely on their intuition and their own experience and knowledge while making an investment. People consulting experts before making an investment have been increasing over the years but it still has a very long way to go.

30 5



100 90 80 70 60 50 40 30 20 10 0

95 79 67 58 75 50

The above chart represents the avenue where investments are made. It is clear that the investors chose more than one avenue as part of their investment. Insurance is a field where people are keener to make an investment followed by Bank FD/Company FD and stocks. Mutual fund was not much preferable only 50% of the respondents were actual investors in the mutual fund industry. Gold/Silver (i.e. bullion) and the IPO (initial public offering) were the least preferred amongst the respondents as an avenue for investment. Others over here could include real property. Even Government securities had a noticeable number of investors. Post office schemes proved to be a very encouraging area of investment.


6 1 Insurance Post Office Savings Gold/Silver Mutual Fund Others


Bank FD/Company FD Government Securities Stocks IPO


60 4 R E S P O N D0 EN T S 20 0 N e ws pa pe r M a ga zine s O the rs 48 18 15 3 1 1 udio / V ide o A dve rtis e m e nt A P ro fe s s io na ls

This input was basically required from the respondents who didnt invest in mutual funds. This means that this question was meant for 50 respondents who did not invest in mutual fund. This chart represents the ways in which respondents who are not investing into mutual funds came to know about mutual funds. Newspapers have been the best mode of advertising for mutual fund .About 96% people have come to know about mutual fund through newspaper advertisement followed by magazines. The share of professionals has been less as compared to other modes. This says there is lot of scope further. Magazines and other mode has been the least contributor.



33 15

35 30 25 RESPOND 20 ENTS 15 10 5 0





Not Aware

This chart represents the schemes of mutual funds of which respondents not investing in mutual funds are aware of. MIP i.e. monthly Income Plan seems to be more popular amongst the respondents. So that could be an area where the mutual fund industry can cash in. The popularity was followed by equity schemes and by debt schemes. There were 8 respondents out of 50 i.e. fairly 16% who were not aware about any schemes of mutual fund industry. The prime concern of the industry people should over here be to educate people regarding the mutual fund industry and its various schemes and how it can prove to be beneficial to an ordinary man.



4% 34% 62% YESNO CANT SAY
The above chart represents the inclination of the respondents to invest in the mutual fund industry. 31 of the 50 respondents are not investing in mutual fund industry and are not willing to do so. Hence it becomes important for the mutual fund industry try to overcome the barriers for these respondents and persuade them to invest in mutual fund. This would be a tough job but can prove to be a good potential market. There are about 4% respondents out of these 50 respondents who are not able to give an opinion whether they would be interested in investing in the mutual fund industry. To get them invest in the same would be relatively easy job. There are only 17 respondents who are willing to invest in mutual fund and hence they can be easily converted into mutual fund investors.

REASONS FOR NOT CHOOSING MUTUAL FUND AS AN INVESTMENT AVENUE Less Secured Unfavorable market conditions Bad Past Record of MFs Unfavorable Returns Others


26 9 10 10


This chart represents the reasons why the respondents were not investing in mutual fund. Over here there was no single main reason that was restricting the respondents to invest in mutual fund. The other reasons over here were lack of knowledge, the feeling that it is not backed by any legislative body, not interested and satisfied with other forms of investment. The main reason over here was lack of knowledge and fear as they believed that it was not backed by any body and hence their investment was not protected. It is this category that mutual fund industry can cash in. They can start educating people about the mutual fund and hence can widen their base. The other reason was that respondents considered it to be less secured than the other investments. Security seemed to be a threat for the respondents. Even the past bad records of the mutual fund industry seemed to be a reason for their disinterest in the mutual fund. There were respondents who thought that the returns

were not enough. That could be an area where it would be difficult to bring in confidence. Even the market conditions seemed to be a prime concern for the respondents. The market as in such seems to be very volatile and hence this restricted the people from investing in mutual fund industry. The reasons were not very strong but that were enough for the respondents for not investing in mutual fund.



84% Y E S NO
This chart represents the respondents, who invested in mutual fund, view whether they found the procedure of the mutual fund too long. It is a general believe that the procedure of mutual fund is too long. The reason for this is that the forms of mutual fund forms were very long as compared to other forms of investment like shares etc. But the respondents at large did not find it too complex because it was their agents who took the pain. Hence their work load was too less.



This chart represents the preference of respondents of mutual fund over as far as the risk factor is considered. From the above chart it is quite clear that mutual fund is considered to be more risky as compared to other forms of investment. About 62% of the respondents investing in mutual fund are of the opinion that mutual fund is more risky as against other forms of investment. There were few respondents that were of the opinion that it was relatively same for every form of investment. But there were about 34% of the respondents who thought that mutual funds were less risky then other forms of investment. The risk factor was generally attributed to the volatile market and the unpredictable companys market.


5 10

35 L E S S M O R E IN D IF F E R E N T
This chart represents the preference of respondents of mutual fund over as far as the liquidity factor is considered. From the above chart it is quite clear that mutual fund is considered to be more liquid than the other form of investment. The investors seem to be satisfied with mutual fund as far as the liquidity factor was concerned. There were few who considered the position to be not very satisfactory. And there were dew who considered it to be same as the other forms of investments.


2% 36%


This chart represents the preference of respondents of mutual fund over as far as the return factor is considered. From the above chart it is quite clear that mutual fund is considered to be giving more returns than the other forms of investment. The returns of mutual fund are considered to be fairer than are other forms of investment. There were very few who considered the returns to be unfair and still few who consider that the returns were fair in all forms of investment.


28% 22%


This chart represents the preference of respondents of mutual fund over as far as the tax benefits are considered. From the above chart it is quite clear that mutual fund is considered more beneficial as far as tax savings are considered. The tax savings of mutual fund industry is better for 50% of the respondents as compared to other forms of investment. There were 28% respondents who considered who considered the savings to be equal in every form of investment. There were very few respondents who considered the tax savings from other investment to be better in other investments.


What motivates a person or an organization to buy securities, rather than spending their money immediately? The most common answer is savings -- the desire to pass money from the present into the future. People and organizations anticipate future cash needs, and expect that their earnings in the future will not meet those needs. You may be willing to invest to make something happen that might not, otherwise -you could invest to build a museum, to finance low-income housing, or to re-claim urban neighborhoods. The dividends from these kinds of investments may not be economic, and thus they are difficult to compare and evaluate. For most investors, charitable goals aside, the key measure of benefit derived from a security is the rate of return.

It is clear that the investors are basically quite conservative and hence are not ready to take any risk with their hard earned money. They are very conscious and hence are not ready to take any risk. The mutual fund is not very new concept in India it still seems that the mutual fund has still a very long way to go before they would get highly established. The maximum numbers of investors still prefers traditional investments like insurance, fixed deposits and shares and seems to be satisfied and hence are not interested in investing in mutual funds. Even the concept of IPO (Initial Public Offering) seems to be less accepted concept. So the hypothesis for the study that the investors still prefer traditional methods of investment has not proved to be completely wrong from the analysis done, which is very evident from the above charts. The number of investors investing in mutual fund seems to be very less as compared to investments modes like insurance, fixed deposits and shares.

The findings from the study are as under: The people are basically of conservative nature and hence are very precautious about their hard earned money. Hence they would like to play it safe when it comes to spending of their money. Security and returns are the two main reasons that are taken into consideration before making an investment. Bank fixed deposits and post office savings seem to be most preferred one among the investors because it is considered to be the most secured one. Shares and mutual funds were considered to be very risky and hence that seemed to be the last choice of the general mass Amongst mutual fund and shares people preferred shares because the possessed complete knowledge about the shares but had very little knowledge about the mutual fund industry. The people who do not invest in mutual fund basically fear that they are less secured as compared with other investments. The others were aware about the concept of mutual fund but were not full aware of its intricacy hence were not interested in investing in it. Most of the investors who invest in Mutual Fund substitute the same against the Bank Deposits, insurance and other saving schemes. The investors are not willing to invest in mutual fund industry unless they are guaranteed about minimum returns. The increase in mutual fund and various schemes have left many investors confused as to which scheme to opt for even if they want to invest in mutual fund.

The increase in Mutual fund and various schemes have increased competition. Hence it has been remarked by many investors mutual funds are too busy trying to race against each other. As a result they lose their stabilizing factor in the market. Many investors are not aware about the asset allocation principles stated by renowned theorists of the mutual fund industry.

The Ground rules of Investing Moses gave to his followers 10 commandments that were to be followed till eternity. The world of investments too has several ground rules meant for investors who are novices in their own right and wish to enter the myriad world of investments. These come in handy for there is every possibility of losing what one has if due care is not taken.
1. Assess yourself: Self-assessment of ones needs; expectations and risk profile is of prime importance failing which; one will make more mistakes in putting money in right places than otherwise. One should identify the degree of risk bearing capacity one has and also clearly state the expectations from the investments. Irrational expectations will only bring pain.

2. Try to understand where the money is going: It is important to identify the nature of investment and to know if one is compatible with the investment. One can lose substantially if one picks the wrong kind of fund. In order to avoid any confusion it is better to go through the literature such as offer document and fact sheets that companies provide on their funds.

3. Don't rush in picking funds, think first: One first has to decide what he wants the money for and it is this investment goal that should be the guiding light for all investments done. It is thus important to know the risks associated with the fund and align it with the quantum of risk one is willing to take. One should take a look at the portfolio of the funds for the purpose. Excessive

exposure to any specific sector should be avoided, as it will only add to the risk of the entire portfolio. Identifying the proposed investment philosophy of the fund will give an insight into the kind of risks that it shall be taking in future.

4. Invest. Dont speculate: A common investor is limited in the degree of risk that he is willing to take. It is thus of key importance that there is thought given to the process of investment and to the time horizon of the intended investment. One should abstain from speculating which in other words would mean getting out of one fund and investing in another with the intention of making quick money. One would do well to remember that nobody can perfectly time the market so staying invested is the best option unless there are compelling reasons to exit.

5. Dont put all the eggs in one basket: This old age adage is of utmost importance. No matter what the risk profile of a person is, it is always advisable to diversify the risks associated. So putting ones money in different asset classes is generally the best option as it averages the risks in each category. Thus, even investors of equity should be judicious and invest some portion of the investment in debt. Diversification even in any particular asset class (such as equity, debt) is good. Not all fund managers have the same acumen of fund management and with identification of the best man being a tough task; it is good to place money in the hands of several fund managers. This might reduce the maximum return possible, but will also reduce the risks. 6. Be regular: Investing should be a habit and not an exercise undertaken at ones wishes, if one has to really benefit from them. As we said earlier, since it is extremely difficult to know when to enter or exit the market, it is important to beat the market by being systematic. The basic philosophy of Rupee cost averaging would suggest that if one invests regularly through the ups and downs of the market, he would stand a better chance of generating more returns than the market for the entire duration.

7. Do your homework: It is important for all investors to research the avenues available to them irrespective of the investor category they belong to. This is important because an informed investor is in a better decision to make right decisions. Having identified the risks associated with the investment is important and so one should try to know all aspects associated with it. Asking the intermediaries is one of the ways to take care of the problem.
8. Find the right funds: Finding funds that do not charge much fees is of importance, as the fee charged ultimately goes from the pocket of the investor. This is even more important for debt funds as the returns from these funds are not much. Funds that charge more will reduce the yield to the investor. Finding the right funds is important and one should also use these funds for tax efficiency. Investors of equity should keep in mind that all dividends are currently tax-free in India and so their tax liabilities can be reduced if the dividend payout option is used. Investors of debt will be charged a tax on dividend distribution and so can easily avoid the payout options.

9. Keep track of your investments: Finding the right fund is important but even more important is to keep track of the way they are performing in the market. If the market is beginning to enter a bearish phase, then investors of equity too will benefit by switching to debt funds as the losses can be minimized. One can always switch back to equity if the equity market starts to show some buoyancy.

10.Know when to sell your mutual funds: Knowing when to exit a fund too is of utmost importance. One should book profits immediately when enough has been earned i.e. the initial expectation from the fund has been met with. Other factors like non-performance, hike in fee charged and change in any basic attribute of the fund etc. are some of the reasons for to exit. Investments in any funds are not risk-free and so investments warrant some caution and careful attention of the investor. Investing funds can be a dicey business for people who do not remember to follow these rules diligently, as people are likely to commit mistakes by being ignorant or adventurous enough to

take risks more than what they can absorb. This is the reason why people would do well to remember these rules before they set out to invest their hard-earned money.

The Indian Investment Industrys development and success would depend on various issues such as: Educate the people: There are lots of alternatives available in the present time. But because of lack of knowledge people are not ready to try them. Even because of the fear to try new ones the investment industry has limited it self. The same can be done through arranging events that promote such innovations. Preconceptions rule: The preconceptions that a person carries tries rule his investment decisions. The past record of shares and mutual fund restrict the people in investing in the same. Though the rules and regulations have changed a lot but there are still people who are not ready to accept such facts. Let them know where there amount in reinvested: The investors should know that the amount that is invested in the company how the funds are used and for what purpose .They

have the right to know where are their funds reinvested i.e. the companies should be transparent. Do not cut others line for showing yourself bigger: The promoters to promote their funds degrading the other modes of investment and hence this limits their investment scopes itself because this act degrades the company in the eyes of the customers Lead through Innovation: Although there is enough room in the market, unfortunately in Indian market, all mutual funds have been chasing the same set of investors with the same set of products and inducements. Product differentiation is the first step towards escaping competition and attracting more investors. Rebuild investors confidence: For a long term growth of the industry, it is a must to win the confidence of the investors and there is no way to do this other than bringing in more transparency in the operations, proper communications between the market players and their customers.

Manage risks through derivatives: India has a wide range of derivatives products in the market. Mutual Fund should also come forward with more of such products. In the Business World dated 24th November 2003 there was news that Benchmark fund is coming out with an Equity Arbitrage Fund called Dynamic Arbitrage Fund. Otherwise SEBI has not allowed any AMC to float a hedge fund in India. Educate investors about the principles: There is no doubt that investors education is one area, which has to be concentrated upon in the mutual fund industry. The Mutual funds must come forward to make funds understandable to them. The must be made aware about various asset allocation principles.