A PROJECT REPORT

ON

A STUDY ON INVESTORS PREFERENCE

TOWARDS MUTUAL FUNDS

A Project Submitted to
University of Mumbai for partial completion of the degree of
Bachelor of Commerce (Accounting & Finance)
Under the Faculty of Commerce

SUBMITTED BY
HARSH D.
GARIYA

TYBAF (SEM VI)

UNDER THE GUIDANCE OF

PROF. MOHITKUMAR SHARMA

March, 2025

St. Rock’s College of Commerce and Science

Borivali West, Mumbai-400092
 DECLARATION

I, Harsh D.Gariya the student of T.Y.B.A.F, Semester VI (2024-25)

hereby declare that I have completed the project on A STUDY ON
INVESTORS PREFERENCE TOWARDS MUTUAL FUNDS . The
information submitted is true and original to the best of my knowledge.

(Signature of student)
HARSH GARIYA

Certified by
Prof. Mohitkumar Sharma
 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are numerous and depth is so enormous.

I would like to acknowledge the following as being idealistic channels and fresh dimensions in the
completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to do this project.

I would like to thank my principal Ms. Nirja P. Sharan for providing the necessary facilities
required for completion of this project.

I take this opportunity to thank our Coordinator Mr. Mohitkumar Sharma, for his moral support
and guidance.

I would also like to express my sincere gratitude towards my project guide Mr. Mohitkumar
Sharma who guidance and care made my project successful.

I would like to thank my College Library for providing me various reference books and magazines
related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped me in the
completion of the project especially my Parents and Peers who supported me throughout my
project.
 TABLE OF CONTENT
SR NO. NAME OF THE TOPIC PAGE NO.

1 INTRODUCTION 1
1.1 Objective of study
1.2 Scope and Limitations

2 RESEARCH METHODOLOGY 5
2.2 Secondary Research
2.2.1 Mutual funds
2.2.2 Types of Mutual funds
2.2.3 Based on Asset class
2.2.4 Based on Structure
2.2.5 Based on Investment
2.2.6 Based on Risk
2.2.7 Specialized Mutual funds
2.3 Hypothesis

3 QUIESTIONAIRE 60

4 ANALYSIS AND INTERPRETATION OF DATA 62

5 FINDINGS 71

6 CONCLUSION AND RECOMMENDATIONS 72

7 BIBLIOGRAPHY 73
 “A STUDY ON INVETORS PREFERENCE TOWARDS MUTUAL FUNDS”

INTRODUCTION

Mutual fund is a company that collects money from various investors and invests their
money in various securities such as Equity, Bonds, Money Market, Short-term debt and
other securities.
Holding of various securities together is known as portfolio. Portfolio is the basket of various
securities. Mutual funds have both merits and demerits as compared to direct investing in
single securities. The profit or income of gains from the investment is then distributed to
the investors according to their share of investment and this is calculated by ‘Net Asset
Value’. Now let us
understand what means ‘Net Asset Value’. How equity shares has its traded price, like that
only Mutual Funds has its Net Asset Value or NAV. The NAV is the combination of
market value of Equity, Bonds and other securities. That is held by a fund on any
particular day (as reduced by permitted expenses and charges). NAV per unit represents
the market value of all the units in a mutual funds scheme on a particular day, net of all
expenses and liabilities and income accrued, divided by the outstanding number of units in
the scheme.
Capital market. As small investors do not have time, knowledge, experience about the
capital market, they have to depend on the intermediary which do the investments and give
benefits to its customers. Investors Mutual funds are conceived as an institution for
providing,
diversification of investments for the small investors in have many advantages like
diversified portfolio, reduction in risk, expertise professional management, and liquidity
and tax benefits. Mutual funds is suitable for the one who lack large investment or for the
one who neither have tendency nor have the time for market research, then too wanted to
grow their wealth. The
money collected from various investors are then invested by the professional fund
managers in line with scheme’s stated objective. In return, fund manager charge the small
fees which is
deducted from the investment the investment. The 1 fees which is charged by the mutual fund
house are regulated and subject to certain limit which is specified by the securities and
exchange board of India (SEBI).
From its inception the growth of the mutual fund is very slow and took certainly lengthy
years to adapt the present day mutual funds. Mutual budget emerged for the first time in
Netherlands in
the 18th century after which was given introduced to Switzerland. Scotland and then
America in the nineteenth century. The main motive behind the mutual fund investments is
to deliver a shape of various funding answer. Over time the concept advanced and the
people acquired increasingly picks of different funding portfolio via the mutual finances in
India, the mutual fund concept emerged in 1960. The credit is going to UTI for introducing
the primary mutual fund in India.
Monetary finances benefited plenty from the mutual finances. Earlier traders used to make
investments at once in the stock marketplace and many times suffered loss due to incorrect
hypothesis. But with the approaching up of the mutual funds, which were treated with the
aid of efficient fund managers, the investment dangers have been lowered by using a
wonderful extent.
India is the highest saving rate globally. This makes necessary for the Indian investors to
look beyond the traditional banks FDs and gold and towards the Mutual Funds. Due to the
lack of awareness made the Mutual Funds as a less preferred investment avenue. Mutual
funds offer multiple choices of product for the investor to invest in the financial spectrum.
The investment goals vary from person to person, some investment goals are post
retirement expense, child’s education and marriage, house purchase, etc. The Indian
mutual funds industry offers plenty of schemes and all the needs of investors.
Mutual fund offers an excellent path for the retail investors and gets benefit from the
uptrend of the capital markets. Investing in mutual funds is beneficial but finding the right
mutual fund is challenging. Therefore investor should do proper market research and take
into consideration the risk-return trade-off and time horizon or consult with professional
investment advisor. To get the maximum benefit from investing then the investor should
diversify its investment into equity, bonds and gold. Investors of all categories can invest in
markets by their own but mutual fund is better choice because its give all the benefits in
one basket.

2
1.1 OBJECTIVES

• To study the investors preference towards mutual funds.

• To study the investors awareness towards mutual funds.

• To study the pattern of investor behavior within the available investment options and to
test awareness among the investor about various fund houses

• To enhance the knowledge about this topic.

• To study the level of satisfaction of investors towards mutual funds.

• To study the factor influencing the investors in selecting mutual fund schemes.

• To find out overall criterion of investors regarding investment.

• To study the growth of mutual fund industry in India.

• To study whether mutual fund is suitable for small investors.

• To study on which basis investors select mutual funds.

3
 1.2 SCOPE AND LIMITATION

SCOPE

The scope has grown quite over the years. In the first age of mutual funds, when the
investment management organizations started to provide mutual funds, picks have been few.
Despite the fact that investors invested their money in mutual funds as these funds provided
them diverse funding option for the first time. By means of investing in these funds they
were capable of diversify their investment in common shares, preferred stocks, bonds and
different financial securities. At
the same time additionally they loved the gain of liquidity. With mutual funds, they got the
scope of easy access to their invested fund on requirement.

However, in today’s world, scope of mutual funds has end up so extensive, that investors
take long time to determine the mutual fund scheme, they may be going to put money into.
Several
investment management companies have emerged over the years who provide numerous
types of mutual funds, each type carrying precise characteristics and exceptional beneficial
capabilities.

LIMITATIONS

• A detailed research was undertaken for the purpose of project. But the detailed research
has its own limitations related to selection of sample size of sample unit.
• Some of the date which is gathered through mutual fund holder may not be reliable.
• Time limit was also a limitation while conduction the study. So, the study does not give
information of whole market.
• The study also reduce the comparison as it was done only in one city i.e. Mumbai.
• Analysis id done limited due to the availability of data.
• It becomes very difficult to evaluate the accuracy of secondary data before using
secondary data.
• Desired information may be out-of-date or may be unavailable.
• The quality of internal secondary data may be biased or exaggerated.

4
2. RESEARCH METHODOLOGY

2.2.1 MUTUAL FUND CONCEPT

A mutual fund is a consider that pools the savings of a number of buyers who share a
common monetary purpose. The money hence gathered then invested in capital market
instruments including equities, debentures and different securities. The earnings earned via
these funding and the capital appreciation found out (after deducting the prices and income
of mutual fund
managers) is shared by means of its unit holders in proportion to the number of units owned
by way of them. Hence a mutual fund strives to satisfy the funding needs of the
commonplace man by way of supplying him or her possibility to spend money on a
diversified, professionally
controlled basket of securities at a notably low cost. The small saving of all of the buyers are
prepare to growth the buying power and lease a professional manager to make investments
and screen the money. Everybody with a surplus of a little few thousand rupees can invest in
mutual funds.

5
 HISTORY OF MUTUAL FUNDS IN INDIA

The mutual fund industry in India began in 1963 with the formation of unit trust of India, on
the initiative of the authorities of Government of India and Reserve Bank. The history of
Mutual Funds in India is divided into 4 different phase.
FIRST PHASE 1963-1987:

Unit trust of India (uti) becomes hooked up on 1963 by means of an act of parliament. It
became set up via the Reserve Bank of India and functioned underneath the regulatory and
administrative control of the reserve Bank of India in 1978. UTI changed into de-related
from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory
and administrative
manipulate in place of RBI. The primary scheme launched by UTI was unit scheme 1964.
On the give up of 1988 UTI had Rs. 6,700 Crores of assets below management.
SECOND PHASE 1987-1993 (ENTRY OF PUBLIC SECTOR FUNDS)
1987 was the entry of non-UTI, public sector mutual funds was setup by public sector banks
and Life Insurance Corporation of India (LIC) and General insurance Corporation of India
(GIC).
SBI Mutual Fund was the primary non-UTI mutual fund installed in June 1987 accompanied by
Can bank 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
Dec 1990. On the end of 1993, the mutual fund industry had assets underneath
management of Rs. 47,004 Crores.
THIRD PHASE 1993-2003 (ENTRY OF PRIVATE SECTOR FUNDS)
The 1993 SEBI (Mutual fund) policies have been established through a more
comprehensive and revised Mutual fund policies in 1996. The enterprise now functions
under the SEBI (Mutual fund) rules 1996. The quantity of Mutual fund houses went on
increasing, with much foreign
mutual price range putting in finances in India and additionally the industry has witnessed
6
numerous mergers and acquisitions. As at the end of Jan 2003, there have been 33 mutual
funds with overall property of Rs. 1,21,805 Crores. The UTI with Rs. 44,541 Crores of
assets under management was way in advance of different mutual price range
FOURTH PHASE SINCE FEB 2003
In Feb 2003, following the repeal of the Unit Trust of India act 1963, UTI turned into
bifurcated into separate entities. One is the specified undertaking of the UTI with assets
under management of Rs. 29,835 Crores as on the stop of Jan 2003, representing broadly,
the asset 64 schemes,
assured go back and certain different schemes. The specified project of UTI, functioning
underneath an administrator and beneath the regulations framed by way of government of
India and does no longer come underneath the preview of the mutual fund policies.
The second is the UTI Mutual fund ltd, sponsored by using SBI, PNB, BOB and LIC. It is
registered with SEBI and functions underneath the mutual fund regulations. With the
bifurcation of the cist while UTI which had in March 2000 more than Rs. 76,000 Crores of
assets beneath control and with the setting up of a UTI Mutual fund, conforming to the
SEBI Mutual fund
policies and with latest mergers taking place among special non-public sector funds, the
annual mutual fund industry has entered into its modern segment of consolidation and
boom. As on the stop of Sept 2004, there were 29 finances, which manage assets of Rs.
1,53,108 Crores under 421 schemes.

ASSOCIATION OF MUTUAL FUND IN INDIA (AMFI):

With the growth in Mutual fund players in India, a want for mutual fund Association in
India became generated to function as a non-income corporation. Association of mutual
fund India (AMFI) become incorporated on 22 august, 1995. AMFI is an apex frame of
all asset management companies (AMC) which has been registered with SEBI. Till date
all the AMCs are which have released mutual fund schemes are its participants. It
capabilities below the supervision and suggestions of its board of directors. AMFI has
brought down the Indian mutual fund enterprise to professional and healthful
marketplace with ethical strains improving and keeping standards.
7
HOW MUTUAL FUND CAN ENHANCE YOUR PORTFOLIO?

For example, amongst equity funds, there are diverse equity funds, large-cap price range,
mid- cap funds, and small-cap funds because it involves market cap classification. Then
there are aggressive funds, which awareness on beating marketplace returns with the aid of
an extensive margin, and balanced funds, that are hybrid in shape because of a massive
allocation to fixed income securities or bonds. There are also area-oriented budget, which
focus on companies from a selected quarter like banking, pharmaceutical, or technology,
among others. There are thematic funds as properly. Meanwhile, ELSS (Equity Linked
Savings Schemes) are diverse price range with a lock-in duration of 3 years and provide
tax benefits. At the fixed earnings side, there are budget, which invest in government
bonds, company bonds, or both. Further, there are period-oriented price range like short,
medium, or lengthy-term and dynamic bond funds.
They provide portfolio diversification:
Significance of mutual fund is not restrained to simply sufficient desire; while offering a
full-size array of alternatives, equity mutual fund also spread throughout their assets across
diverse
sectors and industries. If there are various funds, it also spreads its belongings throughout
market capitalizations. Aside from this, equity funds can invest some element of their assets
in bonds as well. This spreading out of assets is the basic idea underlying diversification.
Portfolio
diversification can be accomplished via purchasing single security as well. However with a
restricted corpus to invest, there are best such a lot of shares and bonds that an investor
should purchase. Extra so, there can be a few bonds which can be out of reach of investors
as the price ticket length of a single purchase is very high. In the meantime, mutual funds
offer immediate diversification.
Risk mitigation and management is a key
Systematic (or market) and unsystematic risk can cause investors to lose cash in monetary
markets. The fear of dropping their capital is what makes numerous investors hesitant to invest in
markets. Although the systematic threat, i.e. The chance inherent in markets can not be
accomplished away, mutual budget try and mitigate the unsystematic chance by way of
using portfolio diversification and professional management. Managing threat and
reducing it to an foremost degree is one of the principal responsibilities of the fund
supervisor and their team of analysts. Diversification is useful in this because as soon as
an investor’s cash is unfold
throughout several sectors, industries, and market caps, the risk spreads out as well. If one
sector or enterprise declines in price, other sectors, and industries can assist counter the
decline or as a minimum soften the blow.

8
STRUCTURE OF MUTUAL FUNDS:

India has a legal framework within which mutual fund should be constituted. In India open
and close-end funds operate beneath the same regulatory structure i.e. as unit trusts. A
Mutual fund in India is permitted to issue open-end and close-end schemes below a not
unusual legal structure.
The shape that is required to be followed by means of any mutual fund in India is laid
down under SEBI (Mutual fund) guidelines, 1996

THE FUND SPONSER:

Sponsor is described underneath SEBI guidelines as any individual who, appearing alone or in
combination of some other company frame establishes a Mutual fund . The sponsor of the fund is
corresponding to the promoter of a organization as he receives the fund registered with SEBI.
The sponsor forms a trust and appoints a board of trustees. Asset management are are
appointed by the Sponsor. As in line with the SEBI guidelines, for person to qualify as a
sponsor, he have to contribute as a minimum 40% of the internet worth of the Asset
Management Company and
possesses a sound financial track document over 5 years previous to registration.
MUTUAL FUND AS TRUSTS:

A mutual fund in India is constituted in the shape of public trust with act, 1882. The fund
sponsor acts as a settler of the trust, contributing to its preliminary capital and appoints a
trustee to hold the assets of the Trust for the advantage of the unit-holders, who are the
beneficiaries of the Trust. The Trust then invites the traders to make contributions of their
cash in common pool, by scribing to "units" issued by using diverse schemes established by
using the Trusts as evidenceIt must be understood that the fund need to be only a "pass
through" vehicle. Under the Indian Trusts act, the trust of the fund has no independent legal
potential itself, as an alternative it is the trustee or the trustees who have the legal potential
and therefore all acts when it comes to the trusts are taken on its behalf through the trustees.
In legal parlance the traders or the unitholders are the beneficial proprietors of the funding
held by way of the trusts, even as these investments are held in the name of the trustees on a
everyday foundation. Mutual fund can invite any range of traders as useful proprietors in
their funding schemes. in their useful interest within the fund.
TRUSTEES
A trust is created through a document referred to as the Trust Deed that is executed through
the fund sponsor in favor of the trustees. The Trust-the Mutual fund- perhaps controlled by a
Board of Trustees - a frame of individuals of Trust Company. Most of the fund in India is
managed by means of forums of trustees. While the Boards of Trustees are governed via the
Indian Trust Act, wherein the trusts are a corporate body, it might additionally require to
conform with the organizations act, 1956.
9
THE ASSET MANAGEMENT COMPANIES:

The role of an Asset Management Companies (AMC) is to behave as the funding supervisor of
the trust under the board supervision and the steering of the Trustees. The AMC is requires
to be authorized and registered with SEBI as an AMC. The AMC of a mutual fund must
have a net worth of as a minimum Rs. 10 Crores at all times. Directors of the AMC, each
independent and non-independent, should be professional expertise in financial services
and have to be people of high morale status, a situation additionally applicable to different
key employees of the AMC.
The AMC can't act as a trustee of every other mutual fund. Except its function as a fund
supervisor, it could adopt detailed activities along with advisory services and monetary
consulting, furnished these activities are run independent of each other and the AMC's resources
(inclusive of personnel, system and many others.) are property segregated by the activity. The
AMC should continually act within the interest of the unit-holders and reports to the
trustees with appreciate to its activities
CUSTODIAN AND DEPOSITORIES:

Mutual fund is in the business of purchasing and promoting of securities in massive volumes.
Dealing with those securities in phrases of physical delivery and eventual safekeeping is a
specialized activity. The custodian is appointed by using the board of trustees for
safekeeping of securities or taking part in any clearance system thru authorized depository
corporations on behalf of the mutual fund and it need to fulfill its duties according with its
agreement with the mutual fund. The custodian has to be an entity independent of the
sponsors and is required to be registered with SEBI. With the advent of the idea of
dematerialization of stocks the dematerialized stocks are stored with the depository
participant while the custodian holds the physical securities. Hence, deliveries of a fund's
securities are given or received by a custodian or a depository player, at the guidance of the
AMC, despite the fact that beneath the overall route and responsibilities of the trustees.
TRANSFER AGENT:

Transfer Agents are liable for issuing and redeeming units of the mutual fund and offer
other associated offerings which include preparation of transfer documents and updating
investor information. A fund might also pick out to perform its activity in-house and fee
the scheme for the service at a competitive marketplace price. Wherein an outside transfer
agent is used, the fund investor will find the agent to be an essential interface to deal with,
for the reason that all of the investor offerings that a fund presents are going to be
dependent on the transfer agent

10
HOW TO INVEST IN MUTUAL FUNDS

STEP ONE – IDENTIFY YOUR INVESTMENT NEEDS

Your monetary goals might also vary based on your age, lifestyle, monetary independence,
family commitments, level of profits and prices among many other elements. Therefore
step one is to evaluate your desires. Begin with the aid of asking yourself these questions
1. What are my investment objectives and needs?
2. How much risk I am able to take?
3. What are my cash flow requirements?

By doing this exercise, you may recognize what you want out of your investment and may
set the inspiration for a sound mutual funding strategy
STEP TWO – CHOOSE THE RIGH MUTUAL FUND.

As soon as you have clear strategy in mind, now you should select which mutual fund and
scheme you want to invest in. The offer document of the scheme tells you its objective and
gives supplementary info like the track record of different schemes controlled with the aid
of the same fund manager.
STEP THREE - CHOOSE THE IDEAL MIXOF THE SCHEME
Investing in just one mutual fund scheme won't meet all of your investment needs. You
may consider making an investment in a mixture of schemes that satisfy your desires.
Investor may decide on the basis of growth and threat ranges which may be labeled as
follows:

• Moderate Plan
• Aggressive Plan

11
• Defensive Plan
• Factors consider in this may be:
• Income Schemes
• Growth Schemes
• Balanced Schemes

• Money Market Schemes

STEP FOUR- INVEST REGULARLY

For maximum people, the method that works nice is to invest hard and fast amounts at
precise quantity periods, say each month. By means of making an investment a set sum
every month,
you get fewer units while the charge is excessive and extra units while the rate is low. As a
result bringing down your average cost per unit. That is known as rupee cost averaging and
is disciplined investment approach observed with the aid of investors everywhere in the
global. With many open-ended schemes supplying systematic investment plans, this
ordinary investing habit is made easy for you.
STEP FIVE- KEEP YOUR TAXES IN MIND
As consistent with the current tax legal guidelines, dividend/earnings allotted made by using
mutual funds is exempt from profits tax inside the fingers of investor. However, in case, of
debt schemes dividend/profits distribution is subject to dividend distribution tax. Further
there are other benefits available for investment in mutual funds under the provisions of
the winning tax laws.
STEP SIX- START EARLY
Its miles perfect to start making an investment early and stick with a regular funding plan.
In case you begin now, you will make more than if you wait 7 invest later. The energy of
compounding helps you to earn income on earnings and your cash multiples at
compounded charge of return.
STEP SEVEN- FINAL STEP
All you need to do now is to get in contact with a mutual fund or your adviser and start
investing. Reap the rewards within the 12 months to come. Mutual fund are appropriate for
each type of investor whether beginning a career or retiring; conservative or risk taking,
growth orientated or earnings seeking.

FEATURES OF MUTUAL FUNDS

PORTFOLIO DIVERSIFICATION/ RISK DIVERSIFICATION

Most mutual funds invest in 50 to 100 various investments based on market capitalization,
sectors and many other demographics. *most effective on an extraordinary occasion do all
shares decline at the identical time and within the equal proportion. Hence, mutual fund
offers a diverse
12
funding portfolio despite a small quantity of investment that might in any other case
require massive capital. In spite of large capital, it's far extremely hard and time-eating
to buy and manage a huge range of investments individually.While making an
investment in few stocks or debentures at once is viable, the threat of potential loss is
all on the investor. However, Mutual Funds lessen the hazard of loss as the portfolio is
largely diversified and the purchases are sponsored through studies and experience of
the fund house. Moreover, the loss is also shared with different investors inside the
same fund. This diversification of threat is one of the key blessings of a collective
funding tool like mutual funds.
PROFESSIONAL MANAGEMENT
Mutual fund schemes are managed by certified an experienced expert who works towards
the fund's defined goal. These financial specialists are accompanied by a specialized
investment research team. The experts and their teams diligently and judiciously observe
companies, their merchandise and overall performance. After thorough evaluation, the
satisfactory funding alternative maximum aptly appropriate to achieve the scheme's
objective is selected. This continuous process adds value to your investment and enables
achieve higher returns
AFFORDABILITY
A mutual fund invests typically buy and promote diverse asset classes in large volumes
permitting traders to advantage from lower buying and selling expenses. Investors can get
exposure to such portfolios with an investment as modest as Rs. 500/-* in mutual funds
thru a systematic investment plan. Such portfolio would otherwise be extraordinarily
expensive to purchase and hold for an investor making an investment without delay in
inventory market.

LIQUIDITY
With open ended funds, investors can redeem (encash) all or part of their investments at
winning net asset value, at any factor of time. Mutual funds are extra liquid than most
investments in stocks, deposits, and bonds. Further, a standardized system allows short and
efficient redemption permitting investors to get cash in hand as quickly as feasible. For
closed ended schemes, investors can redeem their investments at prevailing Net Asset
Value, situation to go out load at particular periods, if furnished within the scheme. In
certain schemes, in which lock in period is stated, investor can't redeem his investment until
that duration.
TRANSPARANCY
Mutual funds are transparent form of investment. Investors get hold of targeted information
and timely updates approximately the nature of investments made, fund manager's funding
method behind the investments, the precise amount invested in every sort of security, etc.
Moreover, the performance of a mutual fund is reviewed by numerous publications and
rating organizations, making it easy for investors to evaluate one fund to any other.
RUPEE-COST AVERAGING
Rupee cost averaging or sip presents the investor a disciplined technique of making an
investment specific amount at regular periods irrespective
13 of the unit charge of the investment.
Therefore, the cash invested fetches more units when the fee is low and lesser while the price is
excessive. Hence, allowing you to reap a lower average value in line with unit through the time.
The approach facilitates smoothen out market ups and downs ultimately, at the same time
as decreasing the chance of making an investment in risky markets.
REGULATIONS
All mutual funds in India are required to register themselves with Securities Exchange
Board of India (SEBI). With investor interest on the helm, SEBI has laid down strict
policies to protect buyers against possible threats. It is even mandatory for mutual fund
distributors to register with Association of Mutual Funds in India (AMFI) and obey the
norms laid by the Securities and Exchange Board of India (SEBI) and AMFI for the
distributors.
CHOICE OF INVESTMENT

Mutual funds are the only product category that caters to every one’s wishes. You may
always discover a mutual fund that suits a time horizon – long, medium, or short; and your
risk-taking capacity – low, medium, high. All this irrelevant of how much you invest, be it
a totally small funding or a huge lump sum. Your adviser will assist select the proper fund/s
for you preserving in thoughts your profile.
MINIMIZING COST
Mutual finances assist traders to gain from economies of scale as mutual funds pool cash
from big quantity people with common interest and invest their money inside the
applicable asset class/classes. This allows the investors share the price of management of
their cash.

BENEFITS OF MUTUAL FUNDS

SMART INVESTMENT
While you put money into an investment tool which invests in a single specific sector there's a
threat of dropping money in a single cross. If the industry wherein you've got invested fails,
then you possibly lose all your cash. But, this isn't the case with mutual fund investments.
While you put money into a mutual fund the associated risk is especially low as most of the
mutual fund 14
schemes spread the funding in a couple of property and sectors for lowering the risk. As a
result, if anyone of the sectors faces a loss then the gains from the alternative sectors will
compensate
LOW-COST INVESTMENT
This is a totally interesting feature of mutual funds. For the reason that mutual fund get
cash from multiple investors, the asset managed services furnished via the company come
at a comparatively low fee or charge due to the fact the quantity is equally divided among
all of the investors
PROFESSIONALY MANAGED
Making an investment in mutual funds is simple. Those funds are professionally managed by
way of professional and experienced fund managers who have widespread experience in
dealing with funds. Hence, even beginners who don't have any understanding approximately
the marketplace can invest in such funds with the help of expert managers. A whole group of
specialists will deal with your funding, layout your portfolio, strategies on your behalf, and
could guide you through every step of investment.
MULTIPLE INVESTMENT OPTIONS
Buyers get a variety of investment alternatives even as making an investment in a mutual
fund. As an instance, in case you want to acquire returns in a short time frame, you have to
preferably put money into short-time period price range but if you have a few further costs
to meet, investing in long-term period funds could be perfect to serve your purpose. Mutual
fund also provides the choice of getting a normal earnings glide at some stage in the tenure
within the form of dividend payout facility. In case your investment objective is to grow
your capital during the funding tenure you may select the boom alternative and for incomes
a everyday earnings you have to move for the dividend facility.

LUMPSUM INVESTMENT OR IN INSTALLMENTS

Mutual fund investments offer funding alternatives for people who do not have a big
amount of money to make investments at a pass. Suppose you are very younger or just do
not have enough cash to invest in mutual fund in one shot, in both the cases you can
nonetheless put money into mutual funds through choosing the SIP investment alternative. A
SIP is a Systematic Investment plan which allows the buyers to invest in mutual funds in
installments (EMIs). Contrarily, when you have a massive sum of money you can invest a
lump sum quantity.
DIVERSIFICATION OF RISK
Though mutual fund investments are issue to market risks, the benefit is that the associated
risk can be assorted. It is completely up to the risk appetite of the investor to determine
how a whole lot threat he/she is prepared to take. At the same time as a high-threat fund
has a tendency to provide higher returns, the chances of loss in these are equally excessive.
So, in case you aren't willing to take a massive risk you have got the choice to pick out low
or medium-risk. A medium-risk fund tends to stability the risk and gives out a medium
return and a low-risk fund has lower risks and gives the bottom returns.

15
EASY LIQUIDITY OPTION
While making investments in mutual funds, an investor receives alternatives for liquidity as
well. Being an investor you may have the power to pick out among regular funds and tax-
saving funds which can be specific from every other in terms of liquidity. Even as in a
regular plan you can liquidate your profits some months after making the investment, in a
tax-saver fund, the principal, in addition to the dividend, can be withdrawn only after the
finishing touch of a 3-year lock-in length.
EASE OF PURCHASE AND REDEEMPTION
The units of a mutual fund scheme can be without difficulty bought and redeemed on the
pertinent NAV costs on all of the working days. Except for the mutual funds which are
locked for a particular time period, like ELSS, the units of the open-ended mutual funds
may be purchased or redeemed on any of the business days until specific in any other case
with the aid of the fund house. Considering the fact that there is no restriction at the
liquidation of the units, the subscribers have easy access to their invested cash.
FLEXIBILTY OF SWITCHING FUNDS
Mutual fund comes with an alternative of fund switching. This indicates the investors can
switch among schemes or among funds to avail higher phrases and/or better returns from
their investment. But, in most of the cases, the fund switching option is to be had most
effective between schemes of the identical fund and no longer among the budget offered by a
particular organization
TAX-SAVING ADVANTAGES
A mutual fund investment also gives tax-saving benefits to investors. In case you invest your
money in mutual fund such as equity-linked savings schemes (ELSS) then you will be
eligible to get tax-deduction advantages under section 80C of the Income Tax Act, 1961. As
per the norms of Income Tax Act, a mutual fund investor is allowed to have tax deduction
benefits up to the quantity of Rs. 1,5000. Hence, when you spend money on such tax-saving
schemes you may get the advantage of not paying income tax for the amount of money
which you have invested within the mutual fund scheme. On this way, such investments will
convey down your taxable income.

DISADVANTAGES OF MUTUAL
FUNDS NO INSURANCE
Mutual funds, even though regulated by way of the authorities, are not insured against losses.
The Federal Deposit Insurance Corporation (FDIC) most effective insures against sure
losses at banks, credit unions, savings and loans, no longer mutual funds. Which means
that despite the risk-reducing diversification advantage supplied by mutual funds, losses
can arise, and it’s miles possible (although extremely not going) that you can even lose
your complete investment.
FEES AND EXPENSES
Most of the mutual funds charges management and operating fees that pay for the fund’s
control costs (normally round 1. 0% to at least 1.5% in keeping with year for actively
managed funds).
16
Further, some mutual funds rate high income commissions, 12b-1 fees, and redemption prices.
And a few funds buy and trade shares so regularly that the transaction charges upload up
appreciably. A number of those costs are charged on an ongoing foundation, not like stock
investments, for which a commission is paid handiest when you purchase and promote.
POOR PERFORMANCE
Returns on a mutual fund are not guaranteed. In reality, on common, around 75% of all
mutual funds fail to overcome the predominant marketplace indexes, like the s&p 500, and a
developing wide variety of critics now question whether or no longer professional money
managers have better stock-choosing abilities than the average investor.

LOSS OF CONTROL
The managers of mutual funds make all the choices about which securities to buy and sell
and while to do so. This could make it hard for you when trying to manage your portfolio.
As an example, the tax results of a decision by the manager to buy or promote an asset at a
positive time won’t be top-rated for you. You furthermore might have to remember the fact
that you are trusting a person else with your cash while you spending money on a mutual
fund.
TRADING LIMITATIONS
Even though mutual funds are incredibly liquid in trendy, most mutual funds (referred to as
open-ended funds) can’t be bought or sold in the middle of the buying and selling day.
You can only purchase and promote them on the end of the day, once they’ve calculated
the present day value of their holdings.
SIZE
A few mutual funds are too big to discover enough properly investments. This is especially
true of funds that concentrate on small agencies, given that there is strict rules about how
much of a single agency a fund may own. If a mutual fund has $5 billion to make
investments and is only capable of make investments a median of $50 million in each,
then it wishes to locate as a minimum one hundred such groups to invest in; as a end
result, the fund is probably pressured to decrease its requirements while choosing
organizations to invest in.

INEFFICIENCY OF CASH RESERVE

Mutual funds commonly keep huge cash reserves as safety in opposition to a large variety of
simultaneous withdrawals. Although this presents traders with liquidity, it way that a
number of the fund’s money is invested in cash in place of assets, which has a tendency to
decrease the investor's potential return.
TOO MANY CHOICES
There are over 10,000 mutual funds in operation, and these funds vary significantly in step
with funding goal, size, method, and style. Mutual funds are available for surely each
investment strategy (e. G. Price, boom), every quarter (e. G. Biotech, internet), and each us
of a or location of the world. So even the process of choosing a fund may be tedious.

17
HOW RISKY YOUR MUTUAL FUNDS IS:

Investors always decide a fund by way of the returns it provides, never by means of the risk
it took. In any historic analysis of a mutual fund the returns is remembered but the risk is
forgotten quickly. So a fund manager might also have used very high-risk strategies (which
are bounded to fail disastrously ultimately) , hoping that his wins might be remembered ( as
they regularly are), but the threat he took will soon be forgotten.

WHAT IS RISK?

Risk may be defined as the capability for harm. However while anybody analyzing mutual
funds uses this term, what is sincerely being mentioned is volatility. Volatility is not
anything however the fluctuation of the Net Asset Value (rate of a unit of a fund). The higher
the volatility, the more the fluctuation of NAV. Commonly, past volatility is taken as an
indicator of future risk and for the mission of comparing mutual fund.

FOLLOWING ARE SOME RISK TO CONSIDER WHEN INVESTING IN

MUTUAL FUNDS.

CALL RISK:

The likelihood that falling Interest rates will cause a bond issuer to redeem or call its high
yielding bond earlier than the bond’s maturity date.
CREDIT RISK:

18
The chance that a bond issuer will fail to repay interest and principal amount in a timely
manner. Also known as default risk.

CURRENCY RISK:

The possibility that returns could be decreased for people investing in overseas securities
due to rise within the price of the U. S. Dollar towards foreign currencies. Also known as
Exchange Rate Risk.
INCOME RISK:

The likelihood that a Fixed-Income fund’s dividends will go down as a result of falling
overall Interest Rates.
INDUSTRY RISK:
The possibility that the group of stock in a single industry will go down in charge due to
improvement in that industry.
INFLATION RISK:

The possibility that will increase within the cost of living will reduce or eliminate a fund’s
actual inflation adjusted returns.

INTEREST RATE RISK:

The possibility that a fund will decline in value due to a boom in interest rates.

MANAGER RISK:

The opportunity that an actively managed mutual fund’s investment consultant will fail to
execute the fund’s investment strategy successfully ensuing within the failure of stated
goals.

MARKET RISK:

Sometimes prices and yields of all securities upward push and fall. Broad outside influences
affecting the market in general cause this. This is real, might also it is huge business
enterprise or smaller mid-sized businesses. This is called Market risk.

HOW RISK IS MEASURED

There are two ways in which you can decide how risky a fund is:

19
STANDARD DEVIATION

Standard Deviation is a measure of how an actual performance of a fund over a time period
deviates from the average performance. “Due to the fact that Standard Deviation is a
degree of risk, a low Standard Deviation is good”.

SHARPE RATIO:
This ratio looks at both, returns and risk, and can provide a single measure that is
proportional to the risk adjusted returns. “Considering that Sharpe ratio is a degree of risk-
adjusted returns, a excessive Sharpe ratio is good”.

20
 COMPARISON BETWEEN VARIOUS WAYS OF INVESTMENT

SCHEMES RETURN CONVINIENCE SAFETY VOLAITLITY LIQUIDITY

EQUITY HIGH MODERATE LOW HIGH HIGH

FI BONDS MODERATE HIGH HIGH MODERATE MODERATE

CORPORATE MODERATE LOW MODERA MODERATE LOW

DEBENTURES TE

COMPANY MODERATE MODERATE LOW LOW LOW

DEPOSITES

BANK LOW HIGH HIGH LOW LOW

DEPOSITES

PPF MODERATE HIGH HIGH LOW MODERATE

LIFE LOW MODERATE HIGH LOW LOW

INSURANCE

GOLD MODERATE LOW HIGH MODERATE MODERATE

REAL ESTATE HIGH MODERA HIGH LOW

TE

MUTUAL HIGH HIGH HIGH MODERATE HIGH

FUNDS 21
2.2.2 TYPES OF MUTUAL
FUNDS BASED ON ASSET
CLASS:

➢ EQUITY FUNDS
Equity funds frequently spend money on stocks and for this reason move with the aid of the
call of stock fund as well. They invest the money pooled in from diverse investors from
numerous backgrounds into shares/stocks of different agencies. The profits and losses
related to these funds rely totally on how the invested stocks carry out (price-hikes or price-
drops) in the stock market. Additionally, equity funds have the potential to generate
significant returns over a period.
Subsequently, the chance associated with those funds also has a tendency to be relatively higher.
➢ DEBT FUNDS
Debt funds invest basically in fixed-income securities including bonds, securities and
treasury bills. They spend money on various fixed income instruments including Fixed
Maturity Plans (FMPs), Gilt Funds, Liquid Funds, Short-term plans, long-term bonds and
monthly income plans, among others. Since the investments come with a fixed interest
rates and maturity date, it is able to be a superb alternative for passive traders seeking out
ordinary income (interest and capital appreciation) with minimum risks.

➢ MONEY MARKET FUNDS

Investors trade stocks within the stock market. Within the identical way, investors
additionally invest within the money market, additionally known as capital market or cash
market. The authorities runs it in association with banks, financial institutions and other
agencies through issuing money market securities like bonds, t-bills, dated securities and
certificate of deposits, amongst others. The fund manager invests your money and pay out
regular dividends in return.
Choosing a short-term plan (not more than 13 months) can decrease the risk of investment
extensively on such funds.

➢ HYBRID FUNDS
As the name suggests itself, a hybrid fund (balanced funds) is an optimum mix of bonds
and shares, thereby bridging the gap among equity funds and debt funds. The ratio can
either bevariable or constant. In short, it takes the first-rate of two mutual funds by
distributing, say, 60% of belongings in shares and the rest in bonds or vice versa. Hybrid
funds are suitable for investors looking to take more risks for ‘debt plus returns’ gain in
preference to sticking to decrease however steady income schemes.

22
BASED ON STRUCTURE

➢ OPEN-ENDED FUNDS
Open-ended funds not have any specific constraint which includes a particular period or
the number of units which can be traded. These funds allow investors to trade funds at
their suitability and exit while required at the triumphing NAV (Net Asset Value). This is
the only reason why the unit capital always adjustments with new entries and exits. An
open-ended fund also can decide to stop taking in new investors in the event that they do
no longer need to (or cannot managed significant funds).

➢ CLOSE-ENDED FUNDS

In closed-ended funds, the unit capital which is going to be investing is pre-defined. Which
means the fund organization cannot sell extra than the pre-agreed number of units. Some
funds also include a New Fund Offer (NFO) period; in which there may be a deadline to
shop for units. NFOs come with pre-defined maturity tenure with fund managers open to
any fund size.Therefore, SEBI has mandated that traders receive the choice to both
repurchase alternative and list the funds on stock exchanges to exit the schemes.

➢ INTERVAL FUNDS
Interval funds have tendencies of each open-ended and closed-ended fund. These funds are
open for buy or redemption only at some point of unique intervals (decided via the fund
house) and closed the rest of the time.

BASED ON INVESTMENT

➢ GROWTH FUNDS

Growth funds usually allocate a considerable element in shares and growth sectors,
appropriate For investors (by and large millennial) who have a surplus of idle money to be
dispensed in riskier plans (albeit with probably high returns) or are positive approximately
the scheme.

➢ INCOME FUNDS

Income funds belong to the family of debt mutual funds that distribute their money in a
combination of bonds, certificate of deposits and securities amongst others. Whelmed by
skilled fund managers who hold the portfolio in tandem with the price fluctuations without
compromising at the portfolio’s creditworthiness, income funds have historically gained
investors higher returns than deposits. Income Funds are best suited for risk-averse
investors with a 2-3 years viewpoint.

23
➢ LIQUID FUNDS

Like income funds, liquid funds also belong to the family of debt fund as they invest in debt
instruments and money market with a tenure of as much as 91 days. The maximum sum
allowed to invest in Income Fund is Rs 10 lakh. A highlighting characteristic that
differentiates liquid funds from different debt funds is the manner the Net Asset Value is
calculated. The NAV of
liquid funds is calculated for 12 months (such as Sundays) at the same time as for others,
only business days are considered.

➢ TAX- SAVING FUNDS

ELSS or Equity Linked Saving Scheme, over time, have climbed up the ranks
amongst all classes of investors. Not only do they offer the advantage of wealth
maximization while permitting you to store on taxes, however in addition they come
with the lowest lock-in period of simplest three years. Making an investment
predominantly in Equity (and related products), they are acknowledged to generate
non-taxed returns within the variety 14-16%. These funds are satisfactory-perfect for
salaried investors with a long-time period investment horizon.

➢ AGGRESSIVE GROWTH FUNDS

Barely at the riskier face while selecting wherein to spend money on, the aggressive
increase fund is designed to make steep monetary gains. Even though prone to market
volatility, you could decide at the fund as according to the beta (the tool to gauge the fund’s
movement in comparison with the market). Instance, if the market suggests a beta of 1, an
competitive growth fund will mirror a higher beta, say, 1.10 or above.

➢ CAPITAL PROTECTION FUNDS

If shielding the principal is the priority, Capital Protection Funds serves the cause even as
earning notably smaller returns (12% at fine). The fund supervisor invests a portion of the
money in bonds or certificate of deposits and the rest closer to equities. Although the
probability of incurring any loss is quite low, it is advised to live invested for as a minimum
three years (closed-ended) to shield your money, and also the returns are taxable.

➢ FIXED MATURITY FUNDS

Many investors select to make investments in the direction of the FY ends to take gain of
triple indexation, thereby bringing down tax burden. If uncomfortable with the debt market
traits and related risks, Fixed Maturity Plans (FMP) – which put money into bonds,
securities, money market and so on. – present a outstanding opportunity. As a close-ended
plan, FMP functions on a set maturity period that may range from one month to 5 years
(like FDs). The fund manager guarantees that the money is allocated to an investment with
the equal tenure, to achieve accrual interest at the time of FMP maturity.

24
➢ PENSION FUNDS

Putting away a portion of your income in a designated pension fund to accrue over a protracted
duration to secure you and your family’s financial destiny after retiring from regular
employment can take care of maximum contingencies (like a clinical emergency or
children’s wedding).Relying solely on financial savings to get thru your golden years isn't
always encouraged as savings (no matter how huge) get used up. EPF is an example;
however there are numerous rewarding schemes supplied by way of banks, insurance
corporations and so forth.

BASED ON RISK

➢ VERY LOW-RISK FUNDS

Liquid funds and extremely-short-term funds (one month to 12 months) are acknowledged
for its low risk, and understandably their returns are also low (6% at nice). Investors pick
out this to fulfill their quick-term economic goals and to preserve their cash secure through
these funds.

➢ LOW-RISK FUNDS

Inside the event of rupee depreciation or surprising countrywide disaster, investors are
unsure about investing in riskier budget. In such cases, fund managers propose placing cash
in both one and a combination of liquid, extremely short-term or arbitrage funds. Returns
could be 6-8%, but the investors are loose to switch when valuations become more stable.

➢ MEDIUM- RISK FUNDS

Right here, the risk factor is of medium level as the fund supervisor invests a portion in debt
and the relaxation in equity funds. The NAV isn't that unstable, and the average returns can
be 912%.
➢ HIGH-RISK FUNDS

Appropriate for investors with risk taker and aiming for massive returns in the form of
interest and dividends, high-risk mutual funds need active management of fund. Regular
performance opinions are mandatory as they're vulnerable to market volatility. You
could count on 15% returns, though most of high-risk funds generally provide up to 20%
returns.

25
SPECIALIZED MUTUAL FUNDS

➢ SECTOR FUNDS

Sector fund make investments totally in one particular area, theme-based mutual funds. As
these funds make investments in specific sectors only with just a few shares, the risk
component is high. Investors are cautioned to hold track of the numerous sector-related
trends. Sector price range additionally supplies incredible returns. A few regions of banking,
IT and pharmacy have witnessed massive and constant boom in the recent past and are
anticipated to be promising in future as properly.

➢ INDEX FUNDS

Desirable best for passive investors, index funds put money in an index. A fund manager
does no longer manage it. An index fund identifies shares and their corresponding ratio
within the market index and placed the cash in comparable percentage in similar stocks.
Even though they cannot outdo the marketplace (that's the motive why they're no longer
popular in India), they play it safe with the aid of mimicking the index overall performance.

➢ FUNDS OF FUNDS

A diverse mutual fund investment portfolio offers a slew of benefits, and ‘funds of fund’
also referred to as multi-manager mutual funds are made to make the most this to the tilt –
with the aid of setting their money in diverse fund categories. In quick, shopping for one
fund that invests in many funds rather than making an investment in several achieves
diversification while maintaining the cost down on the identical time.
➢ EMERGING MARKET FUNDS

To put money into growing markets is considered a volatile wager, and it has passed
through negative returns too. India, in itself, is a dynamic and rising marketplace
wherein buyers earn high returns from the domestic stock marketplace. Like any
markets, they may be additionally vulnerable to market fluctuations. Additionally, from a
longer-term angle, emerging economies are anticipated to contribute to most of the
people of world growth within the following a long time.

➢ INTERNATIONAL/FOREIGN FUNDS

Favored by means of investors looking to unfold their investment to different countries,

overseas mutual funds can get investors excellent returns even when the Indian stock
markets perform properly. An investor can appoint a hybrid technique (say, 60% in domestic
equities and the relaxation in foreign funds) or a feeder technique (getting local funds to
place them in foreign shares) or a theme-based allocation (e. G., gold mining).

26
➢ GLOBAL FUNDS

Apart from the equal lexical which means, global funds are pretty unique from
International funds. At the same time as a global fund mainly invests in markets global, it
also includes investment in your home country. The international funds pay attention
totally on foreign markets. Various and universal in technique, global funds can be quite
unstable to owing to specific rules, market and foreign money variations, although it does
work as a smash in opposition to inflation and long-term returns were traditionally
excessive.

➢ REAL ESTATE FUNDS

No matter the real estate increase in India, many investors is still hesitant to invest in such
projects due to it’s a couple of risks. Real estate fund may be an ideal alternative because
the investor can be an indirect participant via placing their money in established real estate
groups/trusts as opposed to projects. A protracted-time period investment negates risks and
legal hassles while it comes to buying a property as well as offer liquidity to some extent.

➢ COMMODITY- FOCUSED STOCK FUND

These funds are best for investors with enough risk-appetite and seeking to diversify their
portfolio. Commodity-focused inventory funds give a chance to dabble in multiple and
numerous trades. Returns, however, won't be periodic and are either primarily based at the
performance of the stock business enterprise or the commodity itself. Gold is the only
commodity in which mutual funds can make investments directly in India. The rest purchase
fund units or stocks from commodity groups.

➢ MARKET NEUTRAL FUNDS

For investors seeking safety from unfavorable market tendencies while maintaining good
returns, market-neutral funds meet the cause (like a hedge fund). With higher risk-
adaptability, these funds provide excessive returns wherein even small buyers can outstrip
the market with out stretching the portfolio limits.

➢ INVERSE/LEVERAGED FUNDS

Even as a ordinary index fund actions in tandem with the benchmark index, the returns of
an inverse index fund shift inside the opposite route. It's far not anything however selling
your shares while the stock goes down, only to repurchase them at an even lesser cost (to
hold until the price is going up again).

➢ ASSET ALLOCATION FUNDS

Combining debt, equity and even gold in an most suitable ratio, this is a significantly
flexible fund. Primarily based on a pre-set system or fund manager’s inferences based
totally at the current market trends, asset allocation fund can regulate the equity-debt
distribution.
27
➢ GILT FUND

Gilt funds are type of debt funds that make investments often in government securities.
These funds have no threat of non-payment of interest or principal amount but get affected
by interest charge movements as the government borrowing normally takes place to be for
an longer duration.

➢ EXCHANGE-TRADED FUND

It belongs to the index fund family and is offered and bought on exchanges. Exchange-
traded funds have unlocked a brand new world of funding possibilities, enabling investors to
gain great exposure to stock markets abroad in addition to specialized sectors. An ETF is
sort of a mutual fund that can be traded in actual-time at a price which can upward price or
fall regularly in a day.

2.2.3 BASED ON

ASSETS EQUITY

MUTUAL FUNDS

Equity mutual Funds make investments as a minimum 65% of their property in equity
shares of several corporations in appropriate proportions. The asset allocation might be
consistent with the investment objective. The asset allocation can be made purely in stocks
of large-cap, mid-cap, or small-cap groups, relying in the marketplace situations. The style
of investing may be value orientated or growth-oriented. After allocating a substantial
element closer to the equity segment and the rest in debt or an allocation between domestic
and global equity. That is to attend to sudden redemption requests in addition to bring down
the risk stage to a point. The fund manager makes buying or selling decisions to take gain
of the changing market movements and obtain maximum returns.
WHO SHOULD INVEST IN EQUITY FUNDS
Your decision to spend money on equity fund ought to be in sync along with your risk
profile, investment horizon, and objectives. Usually, when you have a long-term goal
(say, 5 years or greater), then it's far better to invest money in equity fund. It will also give
the fund the time it needed to combat with market fluctuation.
PERFORMANCE OF EQUITY IN INDIA
Among all classes of mutual funds, equity fund usually deliver the highest returns. On
common, equity funds have generated returns inside the range of 10% to 12%. The returns
vary depending on the market fluctuations and overall economic situations. To earn returns
consistent with your expectancy, you want to pick out your equity fund cautiously. For that,
you need to strictly comply with the stock markets and possess knowledge of the
quantitative and qualitative elements. Clear tax assists with the aid of handpicking the top-
acting investment portfolios for you, which suits your financial goals.

28
TAXATION OF EQUITY
Short-term capital gains are taxable at 15%. The Union Budget 18-19 bought back the
taxable on Long-term gains at 10% if the sums exceed Rs. 10 Lakh a year.

ADVANTAGES
CAPITAL APPRECIATION- Equity funds are regarded to provide higher returns
compared to different funds, consisting of debt funds. They could help an investor generate
massive wealth in the long run.

TAX BENEFIT-ElSS funds provide to its investors tax advantages to the track of
₹1,50,000 underneath section 80c of the Income Tax Act.
SMALL SYSTEMATIC PAYMENTS - Systematic investment plan (SIP) lets in
investors to deposit a small sum of money at regular intervals. Useful for those who do not
need to make investments of their money at one pass. Facilitates traders reap the benefit of
averaging.

LIQUIDITY- Most Equity funds (besides ELSS) are liquid in nature that means investors
can withdraw their money each time they chose to do so.
DISADVANTAGES

NOT FOR SHORT TERM- Equity fund can’t be an investment alternative for short
term. Because the returns are volatile in nature for short period.
HIGHER RISK- Equityfunds entail higher risk compared to debt funds and aren't
appropriate for those investors who want a lower risk for his or her investment.
LOCK IN- ELSS funds have a lock in period for 3 years, therefore it less liquid in

nature. TOP EQUITY MUTUAL FUNDS

FUND NAMES 3 YEARS RETURNS 5 YEARS RETURNS
MIRAE ASSET LARGECAP FUND 12.51 % 12.08%
AXIS BLUECHIP FUND 16.51% 9.67%
ICICI PRUDENTIAL BLUECHIP FUND 7.05% 6.24%

DEBT MUTUAL FUNDS

A debt mutual fund (additionally called as a fixed-income fund) invests a sizeable part of
your money in fixed-income securities like government securities, debentures, corporate
bonds and different money-market instruments.
29
WHO SHOULD INVEST IN DEBT FUNDS
The one who is risk-averse. Debt fund returns are predictable; in the experience you
recognize the interest income and the maturity value in advance. This makes them safer
avenues for conservative investors.

The underlying debt securities have a maximum maturity of 10 years. Debt funds are
higher suitable to the financial goals that need an assured sum of money like
compensation of a mortgage, shopping for a car or money for the holiday. These desires
are short to medium-term in nature.
TYPES OF DEBT FUNDS

• Dynamic funds
• Income funds
• Short-term and ultra short-term funds
• Liquid funds
• Gilt funds
• Credit Opportunity funds
• Fixed Maturity Plans

TAXATION OF DEBT FUNDS

A capital gain made during a period of less than 3 years is known as a Short-term Capital Gain
(STCG). A capital gain made more than a period of 3 years is known as Long-term Capital
Gains (LTCG). Here, the tax is as per the income slab, STCG is taxable at 30% where as
LTCG is taxable at 20%.

ADVANTAGES

LOW RISK- With the proportionately high incorporation of debt-associated investment

alternatives, debt mutual funds are much less risky in comparison to all other forms of
mutual funds. Debt mutual funds may be taken into consideration as an investment for an
investor with a motive of short-time period wealth building, in addition to, for someone with
a perspective a building a large corpus in long-term.

LIQUIDITY- Debt mutual fund schemes, specially liquid funds, have a excessive degree of
liquidity and investors can ‘cash out’ their investment a ways extra speedy than most of the
other similar investment alternatives.
30
FLEXIBILITY- Cash that’s been invested in a debt fund scheme can often be transferred to
an equity scheme or any other scheme of the investor’s deciding on. Other investments do
not provide this level of flexibility.

DISADVANTAGES

LOW RETURNS- Investors attracted with the profitable returns of stocks and equity-
related assets may get disillusioned with the fee of go back inferred of the debt mutual
funds. As 60% to 70% of the fund's corpus is invested in debt schemes, following which, the
overall return of the fund decreases notably.
FUNDS NAMES 1 3 5
Y Y Y
E E E
A A A
R R R
R R R
E E E
T T T
U U U
R R R
N N N
NIPPON INDIAN GILT 13.83% 8.61% 9.97%
SECURITIES FUND
SBI MAGNUM MEDIUM 11.98% 8.91% 9.55%
DURATION
FUND
KOTAK CREDIT RISK FUND 10.28% 8.15% 9.39%

MONEY MARKET FUNDS

Money market funds are type of mutual funds that buyers usually use for notably low-risk
holdings in a portfolio. These funds generally invest in short-term debt instruments, and they
pay out income in the form of a dividend.

WHO SHOULD INVEST IN MONEY MARKET FUNDS

Money market funds have a maturity period of just 1 year, so it is suitable for the investor
with short-term horizon. It is consider as one of the safest investment, so it suitable for
the one who wants to play safe or have less risk appétit. Money market deals with bulk
orders so it is suitable for the big corporation and retailers rather than individuals.
31
ADVANTAGES OF MONEY MARKET FUNDS

Safety and High rate of return - The number one advantage of money market funds over
other short-term investment alternatives is that they may be distinctly safer than, say,
shares or equity investments. Further, money market investments have a decent rate of
return throughout investment, which is another benefit.

Liquid investment- Money market funds are liquid investments which provide regular
dividends along with easy access to the principal amount of investment. The liquidity of the
market allows buyers to take benefit of the growing rate of return within the short term and
select an appropriate money market fund accordingly.

Yield - Money Market funds pay a yield based totally on the holdings of the underlying
fund. The yield is automatically reinvested into the fund through buy of additional shares
within the fund. This yield makes money market funds an attractive opportunity to the
mattress.

DISADVANTAGES
May weaken Purchasing power - If inflation rises plenty quicker than your return in the
money market account, you're losing purchasing power.
Expenses may accumulate - Small annual charges can acquire and eat away at your profit,
particularly while you’re only earning 2 or 3 percentage in the account. As a end result, it’s
even extra difficult to your money to hold up with inflation.

Investment objective - In case you’re making an investment long term for a retirement
fund, you wouldn’t want money market fund. Usually, these budget whip out returns best
slightly higher than the inflation charge. It’s better to apply money market funds as
temporary parking spaces for predicted cash outlay.
FUND 1 YEAR 3 YEAR 5 YEAR
NAMES RETURNS RETURNS RETURNS
L&T 8.0% 7.6% 8.3%
MONEY
MARKET
FUND
ADITYA 7.9% 7.6% 8.2%
BIRLA
SUNLIF
E
32
MONEY
MANAG
ER
FUND

KOTA 7.7% 7.4% 8.1%

K
MONE
Y
MARK
ET
FUND

33
HYBRID MUTUAL FUNDS
Hybrid mutual funds invest across distinct asset classes, aiming to minimize risk and set up
capital appreciation. A well-managed hybrid mutual fund scheme (of any type) goals to
generate income in the short term and capital appreciation in the long term - through a
properly-planned distribution of the investment corpus throughout different asset classes.
For long-term capital appreciation, the scheme will spend money on equity stock of
organizations, and for short-term income generation, the scheme will invest in debt units
and government bonds.
WHO SHOULD INVEST IN HYBRID FUNDS
Hybrid funds are taken into consideration a safer bet than Equity funds. Those provide better
returns than proper debt budget and are famous amongst conservative investors. The
presence of equity components in the portfolio offers the ability to earn higher returns. At
the same time, the debt thing of the fund affords a cushion in opposition to excessive
market fluctuations. In this way, you receive strong returns rather than a total burnout that
may take place in case of pure equity funds.
TYPES OF MUTUAL FUNDS
Equity oriented hybrid funds – In this fund, the fund manager invest more in Equity
funds i.e more than 65% and the rest in Debt funds.
Debt oriented hybrid funds – In this fund, the fund manager invest more in Debt funds i.e
more than 65% and rest in Equity funds.
Monthly Income Plans - Those are hybrid funds that invest predominantly in debt
contraptions. A Monthly Income Plan (MIP) would commonly have 15-20% exposure to
equities. This would permit it to generate better returns than ordinary debt funds.
Arbitrage funds – In this funds, a manager tries to maximize its return by buying shares in
one market at lower price and selling it at another market for higher price.
ADVANTAGES
Reduced risk - Considered one of the largest advantages of balanced budget is they reduce your
Investment risk through balancing your exposure towards debt and equity.
Best for first time equity investor - Balanced funds may be a great investment
instruments for first-time equity investors, who do not have plenty information about
making an investment in equity market and are usually risk averse.
Stable and consistent returns – As equity funds returns are highly volatile but balanced
funds have mostly stable and consistent return over a long time.

34
DISADVANTAGES
They are not risk-less – As in hybrid fund 50-60% is invested in equity funds so it is
exposure to risk.
Returns are lower than equity funds - Even as balance funds can be more secure option to
invest in stock market, the safety comes at a price. Most of the balanced funds commonly
below perform equity mutual funds specifically in the course of bull market as a part of their
fund still remains allocated to debt funds.
FUNDS NAME 1 YEAR 3 YEAR 5 YEAR
RETURN RETURN RETURN
ICICI 9.6% 8.5% 8.3%
PRUDENT
MIP
SBI EQUITY 13.6% 10.6% 8.3%
HYBRID
FUND
KOTAK 11.4% 6.7% 7.3%
DEBT
HYBRI
D FUND

2.2.4 BASED ON STRUTURE

OPEN-ENDED MUTUAL FUNDS

A mutual fund is floated inside the market thru a new fund offer. In case of open-ended
fund, an investor should purchase or promote units of an open-ended mutual fund at any
time after the
closure of NFO. The NFO is usually open for a maximum period of 30 days. Investment in
those funds may be made via Systematic Investment Plans (SIPs) and Systematic
Withdrawal Plans
(SWPs).
ADVANTAGES
Liquidity - Open-ended funds provide high liquidity as they permit investors to redeem the
fund units at any time they need. The fund units are redeemed on the fund’s Net Asset Value
(NAV) of the day on which units are redeemed.
Availability of track record - Unlike close-ended fund, the performance track record of an
open-ended fund spanning throughout various market cycles is available. This allows
investors to take a well-knowledgeable choice.
Systematic plans - Open-ended funds permit investors to make use of systematic plans
each for the investment and withdrawal purpose.
35 An investor can't employ SIPs, SWPs and
STPs with close-ended funds.
DISADVANTAGES
• Unlike to close-ended funds, open-ended funds are prone to massive inflows and
outflows. A sudden outflow can pressure a mutual fund supervisor to sell holdings
at rock-bottom prices, causing a loss to all unit holders within the fund.
• Open-ended funds carry a significant amount of market risk. The NAV of an open-
ended fund fluctuates every day because of stock market volatility. For this reason, one
have to cautiously invest in open-ended funds.
• The liquidity offered by way of open-ended fund can also be a drawback. Considering
the fact that there may be no lock-in in case of open-ended fund, investors can be
tempted through greed to invest extra money in bull markets and by using may redeem
units in
unstable conditions owing to fear.
• Open-ended fund also have exit loads. These are charges levied upon you if you exit
the fund within certain predefined time intervals, commonly up to 1 yr.
1 YEAR 3 YEAR 5 YEAR
RETURN RETURN RETURN
KOTAK 8% 8.7% 8.4%
STANDARD
MULTICAP FUND
ICICI PRUDENT 3% 7.1% 6%
BLUECHIP FUND
SBI BLUECHIP 6.2% 6.3% 6%
FUND

CLOSE-ENDED MUTUAL FUNDS

The fund managers commonly spend money on theme-based funds like contra funds with a
view to restrict their spread. Because of the lock-in period, the fund managers don’t fear
approximately unexpected redemption requests, as a result giving them better flexibility to
manipulate the funds. Investors are allowed to invest (or buy) simplest on the time of NFO.
They ought to keep directly to the fund until the NFO term is up (typically among 3 to 5
years). As there is not available of information about fund before the NFO, it's sensible for
the investor to do thorough studies on the portfolio spread. They are able to earn regular
dividends if the fund portfolio performs nicely.
ADVANTAGES
Stable Asset base- In closed-ended funds, the investors of the funds are allowed to redeem
the units of the fund on prescribed date i. e. on the maturity of the fund. This hence
permits the creation of a stable base of assets.
36
Underlying allocation - Closed-ended funds have the flexibility to restrict their investment
Spread to around 20-30 shares in the portfolio. This improves the chance of better returns
from these portfolio bets of closed-ended fund.
Distribution - The earnings are allotted to the shareholders by way of the investment
funds at regular intervals. This is typically done monthly or quarterly and is implemented
in two
approaches: Income is brought to the shareholders because the fund collects net interests
or dividends. Once realized, the capital gains are exceeded to the shareholders.
Leverage - Closed-end funds can properly use leverage to increase the performance of the
investment with the aid of producing greater gains or earnings. Whenever the funds use
leverage, the NAV turns into more risky than the alternative funds, which do not use
leverage.
Lower expense ratio – Close-end fund have limited number of shares, therefore it have
less expense ratio as compared to other investment.
DISADVANTAGES
Pricing risk - Like other instruments in the market, supply and demand affect the rate of
a closed-end fund. Closed-end fund change fund trade at its Net Asset Value. Frequently,
buyers price them at a discount or premium. In doing so, their share prices stay volatile
for the
maximum element.
Market risk - The market has come to be greater unstable than ever in the last few years.
This is due to the uncertain economic situations, investors’ insecurities and global security
anxieties.
Investors have to think about that each one those would possibly reason a market decline
in the value of the CEF.
Interest risk - While interest rate rises, the prices of bonds and preferred securities
commonly move down – and vice versa. Bonds with longer maturities react even greater
extensively to
these fluctuations. If the closed-end fund has a substantial amount of bonds in its portfolio,
this risk can have an effect on it notably.

Credit risk - Credit risk refers back to the provider’s ability to pay the instruments pricipal
and interest as they end up due. For fixed-income closed-end funds, this risk is also present
in it. The
bonds in the portfolio fail to pay on time, it will have an effect on the fund. Other than
disrupting the regular distribution, the NAV and price ought to suffer.
International risk - International stocks and bonds carry extra risks. Elements like
foreign corporation risk, market threat, forex threat, and correlation risk are all too real.
These risks are even greater in emerging markets and economies. The securities are
greater volatile than US shares due to the fact they face extra pressure in the market.

37
dedicated to the investors. On top of this, the rate of the shares of a leveraged fund can
come to be very unstable. This would lead to an inconsistent distribution of wild market
share prices

FUND 1YEAR 3 YEAR 5 YEAR

NAMES RETURN RETURN RETURN
SBI SMALL 8.33% 11.28% 17.07%
CAP
FUND
MIRAE 18.27% 14.40% 17.53%
ASSET
EMERGING
BLUECHIP
FUND
KOTAK 11.35% 8.38% 12.89%
EMERGING
EQUITY
SCHEME

INTERVAL MUTUAL FUNDS

Interval funds can invest in equity or debt or in both. The units of those funds may be
bought and/or redeemed only for the duration of precise time intervals. The fund house
declares these intervals in which the buyers can sell/buy units. They are similar to closed-
ended funds where you can not buy/redeem units regularly.
WHO SHOULD INVEST IN INTERVAL FUNDS
An interval fund is good for investors who have short-time financial goals and who're
inclined to take low to moderate level of risk. Due to the fact that interval funds are not
listed on stock exchange, their property is in the form of forestry tracts, commercial assets,
business loans, and personal property. Investors who're willing to get exposure to such
unconventional assets can spend money on these funds.

ADVANTAGES
• The return on close-ended funds are much higher than that of open-ended funds
• Interval funds grant retail investors with access to institutional-grade
alternative investments with comparatively low minimums.
• Funds are relatively stable and market reactive because investments are not tied
to equities

DISADVANTAGES
• As compared to open-ended funds, close –ended funds are illiquid
38
• As the yields are higher likewise its fees are also higher as compared to open-ended funds
• There is each a transparent and conflict-of-interest because the portfolio manager
is permitted to spend money on different funds of the fund sponsor.
• The repurchase is carried on a pro rata basis, consequently there is no guarantee
for redeeming all of the shares for the duration of a redemption window

2.2.5 BASED ON INVESTMENT

GROWTH MUTUAL FUNDS

A growth fund is a diversified portfolio of stocks that has capital appreciation as its
primary intention, with very little dividend payouts. The portfolio especially includes
businesses with above-average growth that reinvest their earnings into expansion,
acquisitions, and/or research and development (R&D).
WHO SHOULD INVEST IN GROWTH FUNDS
Growth funds consist of high-risk. So, invest only if you are an aggressive risk taker. For
this reason, it has capacity to deliver high returns. If you are close to your retirement age,
it'd be prudent to no longer invest in it. This fund is for long-term. Therefore, opt for these
only if you are risk tolerant and are inclined to make investments for at the least 5 to 10
years.
ADVANTAGES
Potential for high returns - This fund attracts numerous investors due to its capital
appreciation capacity. Professional money managers spend a considerable amount of effort
in identifying and selecting out those shares.
Tax-efficiency - Growth funds attract to long-term capital gains tax or LTCG tax of 10%, if the
incomes is above 1 lakh and held more than a year. Nevertheless, they are more tax-efficient
than that of price stock mutual funds.
39
Expert money management - A team of certified experts, who identifies growth stocks
for the investors, manages a growth fund. The buying and promoting decisions pertaining
to the stocks are taken by the manager. Which leaves your role to limited to that of a
passive investor.
DISADVANTAGE
High market risk – If there is a decline in the growth fund then you are exposed to risk of
losing the entire investment
Possible value depreciation - These funds are also liable to decline in price and are of a
highly volatile nature. The value of the shares can fall or rise as according to the market
demand
No dividends – Growth funds do not deliver regular money in the form of dividends,
interests, bonus, etc.
3 YEAR 5 YEAR
RETURNS RETURNS
AXIS BLUECHIP FUND 20.23% 12.06%
ICICI PRUDENT LONG TERM 9.72% 9.79%
BOND FUND
DPS EQUITY & BOND FUND 12.03% 11.12%

INCOME MUTUAL FUNDS

HOW INCOME MUTUAL FUNDS WORK
The fund manager of an Income fund endeavors to supply good returns regardless of the
interest charge regime. This means that income funds try to provide returns whether or not
the interest
rates are growing or falling. This is completed via active management of the investment
portfolio. The two extensive techniques observed via fund managers are:
i. Producing interest income – which is executed while the fund holds the debt units till maturity

ii. Earning gains – that's achieved by way of selling the debt devices within the
market if their price increases

Commonly, these funds pick debt units with better protection (or instruments with a higher
quality rating) and a lower interest rate risk.
WHO SHOULD INVEST IN INCOME FUNDS

By way of the distinctive feature of its definition, an Income fund is best-suited for an
investor with moderate risk tolerance and an investment objective of earning regular returns.
These are a very good option for conservative investors looking to discover mutual funds in
a low-risk zone.
3
10
ADVANTAGES

• Better returns than FDs: Income funds usually generate returns higher than fixed
deposits in the long term. They aim to achieve this through taking advantage of interest
rate volatility. But, Income funds do carry interest rate risk and credit risk on other side FDs
deliver negligible or zero threat.
• Highly liquidity: Not like a few Fixed deposits, income budget do now not have any
lockin period and allow investors to any time withdraw their investment. But exit
loads can be imposed for redemptions in these funds from 1-3 years.
• Tax efficient: Income funds are tax efficient than fixed deposits, specifically for those
buyers who fall in the Income tax brackets of 30%. Long-term capital gains
(maintaining period over 3 years) on debt funds are taxed at 20% with indexation in
contrast to interest on fixed deposits that's taxed as according to the investor’s earnings
tax slab.

1 3 5
Y Y Y
FUND NAME
E E E
A A A
R R R
R R R
E E E
T T T
U U U
R R R
N N N
SBI REGULAR SAVING BANK 7.24 8.55 9.98

1 3 5
Y Y Y
FUND NAME
E E E
A A A
R R R
R R R
E E E
T T T
U U U
R R R
40 N N N
ADITYA BIRLA SUNLIFE 6.98 8.43 9.54
TREASURY OPTIMIZER
FUND

FRANKLIN INDIA INCOME 8.06 8.25 9.09

BUILDER FUND

40
LIQUID MUTUAL FUNDS
A liquid fund is a mutual fund scheme that invests in money market securities with a low
maturity period of 91 days or much less. These funds provide a safe and secure alternative
for parking surplus budget or to set aside an emergency fund amount
TAXATION OF LIQUID FUNDS
Returns from liquid funds are taxed based on the holding period of invested capital:

➢ In case you withdraw the amount earlier than three years of investment, STCG tax as
per the income tax slab of the investor. As an instance, if an investor gains ₹30,000,
thru
investment in liquid fund, ₹30,000 are brought to income tax slab of the investor and taxed
hence.
➢ If an investor withdraws the investment together with capital gains put up three years
of investment, long term capital gains tax of 20% is levied, with the advantage of
indexation.

ADVANTAGES
Fixed returns - Since liquid fund invest in debt instruments that provide constant interest rate,
the returns from investment in those are constant. As the securities mature, an investor gets
back the principal amount coupled with the constant interest that the units offer.
High liquidity - Owing to short time period maturities of the underlying invested units,
liquid funds are fairly liquid. It is easy to redeem the invested capital as in line with
his/her comfort. There's no lock-in period on investment in liquid funds.

No exit load - A plus point to excessive liquidity that the fund offers is that there's no
relevant exit load while you withdraw the invested capital after 7 days of investment.
Low risk - The investment portfolio of liquid funds consist of short time period money market
instruments. The best maturity of any invested security is 3 months, which efficiently protects the
portfolio from interest rate changes.
DISDVANTAGES
• Liquid funds have credit risk a lot lower as the duration of invested bonds are short.
But after IL&FS crisis maximum liquid funds gave poor returns for few months.
• Returns can be a bit lower. Inside the bond space, you cant eat your cake and have it
too. You cannot get higher returns, if you reduce credit risk.

41
TAX SAVING MUTUAL FUNDS

HOW TAX SAVING MUTUAL FUNDS WORK

When an investor invests money in a mutual fund, the invested capital is brought to the pool. The
portfolio corpus of the fund is then invested in the equity market in this type of balanced way
that even though one investment incurs losses, the other investment manages to mitigate the loss.
ELSS schemes generally tend to include a lock-in duration of 3 years, which means that that
the investment can't be withdrawn for till the end of the maturity period. If the investment is
made in systematic monthly installments (SIP) then the lock-in period for every installment
is 3 years. On the subject of redemption of the units of the fund, the buyers can redeem only
the unlocked units at the current NAV price. The NAV or the net asset value of the units is
the amount that an investor gets for each unit upon redemption. But, a good way to make
withdrawals, you'll need to know the variety of units below the scheme and submit a claim
form to the mutual fund provider. They will credit the amount in your account as quickly as
it's far processed.

ADVANTAGES
• Tax saving investments traditionally has long lock-in time but ELSS have only 3
years lock-in period.
• ELSS have SIP so because of it the investor do not have to invest the total amount at
the end of the year.
• You can diversify your portfolio by investing more than one ELSS funds and if one
fund is underperforming you can switch to other fund.
• The tax benefit of ELSS makes it different from other Equity funds. You can
claim deduction under 80C by investing in this funds

42
DISADVANTAGES
• ELSS is equity linked investment, so no one can stop its exposure to risk , so it is not
suitable for conservative.
• The money which you get after maturity i.e after 3 years will be taxable as long term
capital gains

3 YEAR RETURN 5 YEAR RETURN

AXIS LONG TERM 18.85% 12.04%
EQUITY
ADITYA BIRLA SL 13.70% 10.54%
TAX
RELIEF 96
DSP TAX SAVER 13.57% 11.60%

CAPITAL PROTECTION FUNDS

HOW CAPITAL PROTECTION FUNDS WORK

The accrued sources from investors are then allotted to equities and debt instruments.
Around 80- 90% of assets are invested in debt, and then the remaining allocated to equities.
The amount invested in debt securities ensures that the principal amount of the investor is
recovered at maturity. At the same time as the amount invested in equities generate returns
for the investor which is commonly better than the ones from Bank Fixed Deposits
WHO SHOULD INVEST IN CAPITAL PROTECTION FUNDS
If you need to grow your investment, taking the least amount of risk, invest your cash in
capital protection funds. People who follow a conservative investment stance, coupled
with low-threat appetite must go for those budgets. They assist in capital appreciation in
the long run together with a good sense of investment security.
CHARACTERISTICS
Close-ended scheme - Subscription to capital protection funds can be done only throughout the
NFO period given that they’re close ended. The invested amount stays locked-in until the
maturity duration. Fund managers can efficaciously park the pooled quantity in securities
that offer long term returns. Close-ended nature of those budgets prevents frequent cash
outflow from the fund. But, its units are traded within the secondary market through the
unit holders.

43
Taxation policy – Taxation policy of these fund is same as debt funds. If the investment is
for 35 years then it is short-term capital gains and if it is more than 5 year then it is long-term
capital gains and it is taxable at 20 %.

FIXED MATURITY PLANS

Fixed maturity plans are close-ended debt funds, that means investments can be made at
some stage in the time of a new fund offer. It comes with a fixed maturity period and
invests throughout debt securities together with excessive rated securities and corporate
bonds. As it is classified as non-equity funds, its investment is done in debt funds and
money market.
FEATURES OF FMP

Fixed Tenure – The maturity period of FMP is fixed and if you’re going to invest through
NFO then you have to wait till maturity period. The maturity period is mostly more than 3
years.
Close-ended scheme – FMP invest through NFO, so it comes under Close-ended funds,
and its maturity period is fixed.
Potentially low credit risk – Most of the FMP is invested in qualify debt securities ,so
there is low chance of credit risk.
Indexation benefits on Returns - A majority of new FMPs function a maturity period of 3
years or greater. This guarantees that long term capital gains taxation regulations which
include indexation benefits are relevant to capital gains from those non-equity investments.
Indexationprovides investors the benefit of factoring in inflation, which reduces usual tax
liability on gains.

PENSION FUNDS
Pension funds are investment pools that pay for employees' retirements. Funds are paid for
by using either employees, employers, or both. Corporations and all stages of government
offer pensions. Key takeaways. Companies reduce pension fund threat with the aid of
relying on fixed income strategies.

WHY SHOULD INVEST IN PENSION FUND

This fund is a government notified pension plan presenting tax advantages under section 80C up

to an investment of Rs. 1.5 lakh (issue to a lock-in duration of 5 years or until retirement
age, whichever is in advance) with a target amount of Rs. 10,000/- or above by the time
the investor 44
reaches the age of 60 years. The fund can make investments up to 40% in equities and the
balance in fixed incomes with an intention to assist investors construct a retirement corpus
and earn a constant income post retirement using convenient withdrawal options.

2.2.6 BASED ON RISK

LOW-RISK MUTUAL FUNDS

Mutual Funds with minimal risk elements involved are called low-risk mutual funds. These
funds come with better returns assurance as they predominantly put money into government
bonds of infrastructure, real property, and so on. The low risk investment portfolio of these
funds make sure that both they fit or stay ahead of inflation. As those funds have a major
portion of
total assets allocated into debt units, the investment horizon is particularly low.
WHO SHOULD INVEST IN THESE FUNDS
• New investors who are not familiar with market fluctuations and what precautions
should be taken
• If you are a risk-averse, then you should choose these funds as they give more
returns than the FDs
• Investors who want a better return in short period then this is suitable, as its
maturity period is 91 days to 1year.

ADVANTAGES
• Low – risk mutual fund is also known as ideal monetary reserves for capital
appreciation through timely liquid investment
• These funds have low risk and higher chance of getting returns is because it invest
in government bonds and securities.
• Investor can easily liquidate its investment for urgent requirement.
• It maturity period is also low which starts from 91 days to 1 year.

DISADVANTAGES
• Returns from this funds are very low
• It is secure investment but not a risk-free investment.

45
 FUND NAME 3 YEAR RETURNS 5 YEAR RETURNS
AXIS LIQUID FUND 6.98% 7.39%
INDIABULLS 7.11% 8.54%
SHORT TERM
FUND
FRNAKLIN INDIA 7.07% 7.49%
LIQUID
FUND

MEDIUM RISK MUTUAL FUNDS

The open-ended mutual funds making an investment in debt and money market units, with the
Macaulay duration of the portfolio among 3 to 4 years are called medium risk funds. These
funds are suitable for the one who wants stable income investment option.
WHO SHOULD INVEST IN THESE FUNDS
These mutual funds are designed essentially for risk-conscious investors looking for risk-
free returns or returns at minimal threat. These mutual funds function the proper
instrument for investors with a medium to long-term investment horizon. Investing in the
first-rate acting
mutual funds for moderate risk can help investors create a strong portfolio. Investors
looking to diversify their portfolio also can invest in moderate risk mutual funds and
decrease the exposure to equity-oriented mutual funds. Investors who aren't prepared for
devastating or large losses can stick to moderate mutual funds.
TAXATION
Moderate risk mutual funds are similar to debt funds in phrases of tax liability. The
relevant tax rate for earning from mutual funds depends at the holding period of the
investment. If the funds have been held for a period of much less than 3 years, a short-
term capital gain tax as per the
investor’s earnings tax slab can be relevant. On the other hand, if the conserving period is
greater than 36 months, long term capital gains of 20% with indexation may be levied
FEATURES
Risk – As compared to low risk funds these funds are more risky. As debt funds are risk-
free but there funds are not, it has market risk, credit risk, and liquidity risk and so on.
Returns – Returns from these funds are high compared to low risk. As some of it part is
invested in debts so it has fixed income but the remaining portion which is invested in
equity are risky.
46 duration of 3-5 years.
Investment horizon – This investment is for the
 FUND NAME 3 YEAR RETURNS 5 YEAR RETURNS
SBI MAGNUM 9.41% 9.99%
MEDIUM
DURATION FUND
KOTAK 7.75% 9.11%
MEDIUMTERM
FUND
IDFCBOND MEDIUM 8.08% 8.53%
TERMFUND

HIGH-RISK MUTUAL FUNDS

High-risk mutual funds confer with funds which have superb potential and the capability to
provide excessive returns. But, these funds are very volatile in nature and include excessive
risks. When you're taking this type of high-risk mutual fund, you will be required to actively
and thoroughly evaluation the performance of these funds on occasion. This may assist you
be aware of how your fund is doing in the market.
WHO SHOULD INVEST IN THESE MUTUAL FUNDS
• High-risk funds are meant for individuals who've a comparable risk appetite and an
long investment horizon. In case you’re planning to retire quickly, it's far higher to
choose tremendously more secure investment avenues consisting of conservative hybrid
mutual funds or long duration debt funds.
• An investor should have patient when it comes to capital profits from high risk mutual
funds. Considering the fact that these funds are quite sensitive to market fluctuations,
one desires to be calm during turbulent economic conditions and wait for the storm to
pass by. Ultimately, the underlying organizations have a high threat of delivering big
returns.

TAXATION
High risk mutual funds invest in equity and equity-oriented securities and acquire the
corresponding tax remedy. If the funds are held for a period of much less than 12 months, a
short-term capital benefit tax of 15% is levied. But, if the funds are held for a period of more
than 12 months, a long-time period capital gain tax of 10% is applicable if the profits are
extra than Rs 1 lakh
47
 FUND NAME 3 YEAR RETURNS 5 YEAR RETURNS
SBI SMALL CAP 11.65% 18.73%
FUND
KOTAK EMERGING 7.49% 13.68%
EQUITY FUND
AXIS MIDCAP 14.31% 13.21%
FUND

2.2.7 SPECIALIZED MUTUAL FUNDS

SECTOR FUNDS
A mutual fund that invests at the least 80% of its assets (as consistent with the guidelines
of SEBI) in a selected sector, including infrastructure, technology, pharmaceuticals,
property, banking, etc is known to be a Sector funds.
WHO SHOULD INVEST IN THESE FUNDS
• Active and educated investors who often examine the macro-economic situation of
multiple sectors may be taken into consideration the ideal investors for sector funds
• Investors who are ready to face heavy fluctuations inside the market with a well built
portfolio should invest in those funds.
• In case you are an skilled investor with a totally high risk appetite, sectorial fund may be
an choice for you
• If you want to invest in sectorial funds, you should have an investment horizon of no
less than 3-5 years

ADVANTAGES
• Potentially high returns if selected efficiently.
• These funds maintain shares across all market cap within that sector.
• With sectorial funds one may also diversify his portfolio with the aid of allocating %
for each sector and buying for sectorial funds therefore across diverse sectors.

DISADVANTAGES
• High volatility than diversified equity shares
• A wrong sector can closely dent the portfolio returns.
• Need extra knowledge on markets and macroeconomic situation.

48
 SECTORS 1 YEAR 3 YEAR 5 YEAR
RETURNS RETURNS RETURNS
BANKING 14.80% 6.90% 8.70%
FUNDS
FMCG 28.30% 11.80% 17.40%
INFRASTRUTUR 21.60% 11.40% 17.70%
E

INDEX FUNDS
Index funds are also called as exchange-traded funds (EFTs) that passively track the
performance of a benchmark index. Due to their passive nature, index funds typically have
lower expenses and then actively-controlled funds.

WHO SHOULD INVEST IN THESE FUNDS

• You are advised to spend money on index fund if you are inclined to live away
from constant monitoring and juggling of your mutual fund portfolio
• you can put money into those funds if you are trying to gain from the mirror returns
of Sensex, nifty, and many others.
• You are suggested to invest in index funds only in case you are looking for a
purchase&- hold over long term of 5 years or greater
• If you are risk-averse investor, you may consider investment in index funds
considering that these are recognized to be much less vulnerable to equity-associated
volatility and risks

ADVANTAGES
Low cost - As index funds are passively managed, the total expense ratio is very much less
as compared to the actively managed ones.
Diversification- An index fund commonly constitutes of top corporations in terms of
market capitalization. It means leading market players throughout the sectors might be a
part of the benchmark index.
No errors - Since the allocation of assets in case of index funds is not on the discretion
of the fund supervisor, there is simply no scope of the investor incurring losses due to
inefficiency in asset allocation or terrible management.

49
DISADVANTAGES
Low flexibility - In view that index funds are passively controlled, the fund manager
cannot purchase and promote securities at their discretion to react to adverse market
situations.
Tracking error - If an index fund does not correctly track its benchmark index, then the
returns to the investor will be different than that of the benchmark.
Under performance - Due to expenses and costs, an index fund may under-perform its
benchmark index. Typically, the index with the bottom rate ratios can more accurately
track the index than comparable ones with higher fee ratios.

FUND NAME 5 YEAR RETURNS

ICICI PRUDENT NIFTY INDEX 8.02%
FUND
UTI NIFTY INDEX FUND 7.21%
HDFC INDEX FUND 7.22%

FUND OF FUNDS
A fund of fund is a type of a mutual fund that invests in other mutual fund schemes. In
this, the fund manager holds a portfolio of different mutual funds rather than investing in
equities or bonds. The fund may select to invest in a scheme of the same fund house or
some other fund
house. The portfolio is designed to suit investors across threat profiles and financial goals.
The investors get an possibility to enjoy the diversification due to making an investment in
numerous fund categories. Fund of funds can be domestic as well as foreign places. In case
of overseas fund of funds, the fund supervisor invests in units of overseas mutual funds
investment.
WHO SHOULD INVEST IN THESE FUNDS
Investors who want to capitalize from investment in a multitude of mutual fund schemes,
via making an investment in a single scheme can choose fund of funds. These investors
can enjoy
the diversification and multi management aspects of FOF. Since there may be full-size
allocation to equity securities, investors should have a moderate risk appetite to spend
money on FOF.
TYPES OF FUND OF FUNDS
• Asset Allocation fund
• Gold fund
• Foreign or International fund of funds
50
• Multi-manager fund of funds
ADVANTAGES
Diversification- Fund of fund target various well performing mutual funds in the market, every

Specializing in a selected asset or sector of fund. This ensures profits through diversification,
as each returns and risks are optimized because of underlying portfolio variety.
Professionally trained managers- Fund of funds is controlled via highly trained people
with years of experience. Proper analysis and calculated market predictions made by
means of such portfolio managers make certain high yields thru intricate investment
strategies.
Low resource requirement- A person with limited financial resources can effortlessly invest in
the top fund of funds to earn better profits. Monthly investment schemes can also be availed
even as selecting a fund of funds to spend money on.
DISADVANTAGES
Expense Ratio- Expense ratios to manage a fund of funds are better than popular mutual
funds, as it has a better managing expense.
Tax - Tax levied on a fund of fund are payable by means of an investor, only during
redemption of the principal amount. However, during recovery, both short-term and long-
term capital gains are subjected to tax deductions, relying upon the yearly profits of the
investor and the period of
investment. It should be stated that the dividend obtained on the investment is not taxable,
as the burden is borne by way of the issuing fund house.
FUND NAME 1 3 5
Y YE YE
E AR AR
A RE RE
R TU TU
R RN RN
E S S
T
U
R
N
DSP US FLEXIBILE 17.15% 13.82% 12.40%
EQUITY
QUANTUM EQUITY FOF 15.67% 9.04% 8.36%
NIPPON INDIA GOLD 23.02% 11.10% 8.13%
SAVINGS

51
EMERGING MARKET FUNDS
Emerging market funds are the type of mutual funds that invests the most of its assets in
stocks domiciled in international locations nations categorized as emerging or developing
through one or more of the principle indexing authorities. These funds provide exposure
to stocks in Asian, Latin American, African and European emerging markets of numerous
market capitalizations. They can be listed or actively controlled by using the fund houses.
These nations are in an emerging boom phase and offer high ability returns with higher
risks than developed market
countries.
HOW DOES EMERGING MARKET FUNDS WORK
Emerging markets have lower per-capita earning, above-average sociopolitical instability,
better unemployment, and decrease levels of business or enterprise activity relative to
America;
however, they also usually have lots higher monetary growth rates. China, Brazil, South Africa,

52
Russia, and India are examples of emerging market economies, and emerging markets funds
in general invest in securities from countries like these. At the same time as emerging
markets bring higher risk than the average investment, the ability for rapid economic growth
in emerging
nations means a higher return potential. Emerging market funds may be very appealing to
any investor who desires to cash in on quickly growing nations because of their
diversification. This diversification can mitigate a lot of the threat of emerging markets, and
the rising markets fund's traditional practice of making an investment in a variety of nations
can similarly mitigate this
risk -- an underperforming investment in one country is unlikely to have an effect on the overall
performance of investments in different emerging markets.

FUND NAME 1 YEAR RETURN 3 5

YE YE
AR AR
RE RE
TU TU
RN RN
S S
EDELWEISS 7.40% 12.1 5.01
EMERGING 1% %
MARKETS
OPPORTUNITIES
EQUITY OFFSHORE
FUND
DHFL PHARMARICA 18.77% 13.2 4.29
GLOBAL EQUITY 0% %
OPPORTUNITIES
FUND
HSBC BRAZIL 26.93% 13.3 026
DIRECT PLAN 1% %

INTERNATIONAL/FOREIGN MUTUAL FUNDS

These funds are also called as Overseas Mutual Funds. Global mutual funds are funds
investing in overseas markets excluding the home country of the investor. Due to the
competitive local markets and an economic system going via its ups and downs, foreign
mutual funds have grow to be an attractive investment preference for buyers in recent
periods.
FEATURES
Risk - Currency exchange rates are always going thru highs and lows. For instance, if the
rupee falls against the dollar in a US-centered53foreign fund, you get more rupees invested
in step with dollar, so the NAV shoots up. On the other hand, if the rupee get increases, you
get fewer rupees in line with dollar, and the NAV drops.
Market Volatility - The recent fluctuation of the other countries market and the sectorial
market (real property, IT, and many others.) may also have an effect on the performance of
the fund.
Consequently, to make an informed choice, it needs lots of observe, study and contemplation.

Return Opportunity - Through concurrently capitalizing on many economies, the portfolio

will generate better returns. Similarly to minimizing risk via diversification, investing
overseas also complements the performance of your portfolio.

54
International Exposure - You may not have enough knowledge of the economy of the
overseas countries and the industry there. An expert advisor might be capable of assist right
here.
Therefore, even if you aren't familiar with it, you will gain exposure to the worldwide market.

GLOBAL FUNDS
A global fund is a fund that invests in corporations placed anywhere in the world including the
Investor’s home country. A global fund seeks to pick out the fine investments from a
worldwide universe of securities. Global funds can also be managed passively.
TAXATION
All mutual funds which make investments in foreign markets are taken into consideration
to be non-equity funds for taxation. For this reason, Global funds are taxed as follows:
In case you sell the devices within 3 years from the date of purchase, then the profits are
added for your taxable income and taxed as in line with the applicable tax slab.
In case you sell the units after the final touch of 3 years from the date of buy, then the
profits are taxed at 20% with indexation benefits.

ADVANTAGES
Investing in these funds is better way to hedge against inflation. You get the
opportunity to invest in emerging markets.
You cover yourself against the ups and downs of the markets in your home
country.

DISADVANTAGES
The investment will be exposed to market risks however you might not be completely
aware about all of the nuances of the market.
A change in the currency rates for applicable currencies can affect your portfolio.

55
 FUNDS NAME 3 YEAR 5 YEAR
RETURNS RETURNS
FRNAKLIN INDIA 10.6% 8.4%
FEEDER-
FRNAKLIN US
OPPORTUNITY
ICICI PRUDENT US 7.4% 8.7%
BLUECHIP
EQUITY FUND

REAL ESTATE FUNDS

A real estate mutual fund (REMFs) is a form of investment that is made from securities
inclusive of stocks of real estate corporations. A big a part of this budget goes into
investment in commercial and corporate properties, residential complexes and agricultural
land. REMFs can spend money on assets, directly or indirectly thru Real Estate Investment
Trusts (REITs).
WHO SHOULDINVEST IN THESE FUNDS
Investors without enough finances to purchase a assets choose real property mutual funds. It is
important to observe that this investment requires a horizon of at least 3-5 years. Those
funds are not endorsed to short-term investors. Also, you want to be privy to how the real
property area functions to get advantage from this investment.

ADVANATGES
Flexibility - They provide excellent flexibility to investors as they've the selection to
make investments depending on their financial goals and the amount of income available
to invest
Stability - When you put money into an assets, if there is a downturn in prices to your
locality for any motive, then you may suffer losses. But, with real estate funds, those
fluctuations are
balanced out since the fund invests in more than one properties spread throughout different areas.
Protect against inflation - When an economy is going through inflation, the prices of
property goes upward and the rents also increases. This results in a growth within the price
of a NAV of a real estate fund.
DISADVANTAGES
• Making an investment into REMFs might cause an inclination closer to different risks for
the investors. It is recorded that the upward push in interest rates causes an eventual
fluctuation within the returns of the real estate mutual funds.
• Sectorial funds get affected by the change in market performance which states that
performance of real estate firm will be great when its market is flourishing. And the
REMFs can get affected if there is drop in this sector.
56
 FUNDS NAME 1 YEAR 3 YEAR 5 YEAR
RETURN RETURNS RETURNS
AXIS BLUCHIP 22% 21% 11%
FUND
DSP EQUITY 20% 15% 10%
FUND

COMMODITY- FOCUSED STOCK FUNDS

Commodity focused fund is a type of mutual fund where an investor trade for a particular
commodity. This helps the investor to earn profit on their investment.
TYPES OF COMMODITY-FOCUSED STOCK FUND
• BASIC TRUE COMMODITY FUND
• FUTURE FUNDS
• NATURAL RESOURCES FUND
• COMBINATION FUNDS
• INDEX FUNDS

FEATURES
Diversification- Diversification of portfolio largely reduces the risk of going down with a
single failed investment thereby diversifying the investment to numerous a couple of stocks
Protection against market fluctuations - Commodities like silver, gold aren't at risk of
market traits as in case of different commodities.
Risk - The risk related to commodities funds can range from geopolitical to market performance
depending at the commodities and how they fare in the foreign markets.
Hedge against inflation - Maximum of these funds supply returns which can be at par with the

worldwide market alterations, therefore performing as a hedge in opposition to inflation.

Flexibility - The traders always have the option to fulfill their short-term or long-term
investment goals by commodity funds.

MARKET NEUTRAL FUNDS

The purpose of market neutral fund is to hedge risk with an investment mix which include
short and long positions. In idea, taking each short and long position minimizes risk,
irrespective of whether the market is trending upward or downward. In short, market neutral
funds assist to insulate your portfolio from vast market swings.

57
ADVANTAGES
• The biggest advantage of investing in market neutral fund is the capacity to
neutralize market movements in your portfolio. By giving identical weight to
short and long

• Investors who have market neutral funds gets stable returns. In view that returns are
less correlated to how the stock market trends through the years, investors can
doubtlessly

DISADVANTAGES
• It is more complicated making an investment approach than sincerely buying and
selling shares. To be successful at it, investors (or their fund managers) have to
take the proper positions — both long or short — for the proper stocks at the
proper time.
• Investing in this type of fund can cause higher cost. As fees for the fund manager is
also high in these funds.

INVERSE/LEVERAGED FUNDS
They may be a special form of funds wherein the price is going up while the stock market
comes down. They are “short funds" or funds having short positions in index or stocks. By
means of
investing in this fund buyers/investors can take gain of fall in the markets.

BENEFITS
Many buyers, rather investors, can employ this kind of fund as a hedge towards market
situations. Hedging is approach that may be used to protect your investments in case of a
market fall. Throughout market corrections, investors/traders could buy a few shares of an
inverse fund with a view to guard their long positions in different funds or stocks. This
manner, even though the market falls, they will be capable of recover a number of their
losses on their long positions with the inverse fund.
DISADVANTAGES
Unlike the traditional funds, there aren't any dividends in those sort of funds. The
expenses entails also are excessive for the reason that frequent churning of positions
required on a day to day basis. Additionally they contain high risks and needs steady
tracking of the fund price and the market direction.

58
ASSET ALLOCATION FUND
It is a combined fund with bonds and equities that consists of stocks, equity funds, bonds
and real estate. The fund spreads the portfolio throughout more than one asset elegance,
depending upon the funding mandate.

DIFFERENT TYPE OF ASSET ALLOCATION

Dynamic Asset Allocation funds - These funds keep changing/adjusting the percentage of
assets in their portfolio consistent with the market fluctuations. While one unique asset class
is expected to do nicely, the fund will increase allocation to that asset and vice versa.

Static Asset Allocation funds - Static asset allocation funds have a pre-decided
percentage of assets allotted to one of a kind asset group. The maximum popular type of
funds right here are
balanced funds that make investments as a minimum 65% of their belongings in equities and
the rest frequently in debt.

IMPORTANTS

Diversification - Traders who need to limit their risk for a given time frame can spend money on
different classes of assets and diversify their portfolio.
Control over Volatility - If an asset class performs outstandingly in one year, there may
be no reality that it's going to perform equally nicely in the subsequent 12 months as
well. The asset class can underperform as nicely. By means of investing in a diversified
portfolio, your investments will no longer get affected greatly by one asset class.

Better returns - In asset allocation fund, the investor’s portfolio get exposed to various
asset groups and therefore, it has a tendency to enhance returns
FUNDS NAME 3 5
YE YE
AR AR
RE RE
TU TU
RN RN
S S
HDFC BALANCED ADVANTAGE FUND 16.6% 15.5%
ICICI PRUDENT BALANCED ADVANTAGE 4.6% 5.8%
FUND

59
GILT FUNDS
Gilt funds only invest in fixed-interest generating investment issued via the central and
state governments. Your investments are directed closer to government-funded
infrastructure initiatives and different safe expenses.

WHO SHOULD INVEST IN THESE FUNDS

Gilt fund only spend money on government securities starting from medium to long-time
period horizons. So, these funds satisfy the investor with their security need. They're not
similar to bond funds because the latter may additionally allocate part of the belongings in
company bonds,which may be volatile. Gilt funds invest in low-risk debt units including the
government securities, which guarantee the preservation of capital along with slight returns.
These funds are suitable for the one who are risk-averse and want to invest in government
securities.

FEATURES
Risk factor- Not like corporate bond funds, gilt funds are the maximum liquid units as
they don’t carry credit risk. The purpose being the government will continually try its
quality in satisfying its responsibilities. But, gilt funds often be afflicted by an interest rate
risk.
Returns - Gilt funds are capable of generating returns as excessive as 12%. However,
returns from gilt funds aren't guaranteed and rather variable with the change in overall
interest rates. Hence, it might be useful to invest in gilt funds when the interest rates are
going down.

Investment horizon - Gilt funds put money into government securities, which have
medium to long-term maturity periods. The average maturity of a gilt fund portfolio varies
among 3-5 years.
Tax on gains – Gains from this are taxable based on your holding period i.e. STCG and
LTCG.Investors will get hold of the STCG from gilt fund, and he must pay the earnings
tax accordingly. LTCG tax, alternatively, is a flat 20% with indexation advantages.
FUNDS NAME 1YEAR 3 5
RETUR YE YE
N AR AR
RE RE
TU TU
RN RN
S S
SBI MAGNUM GILT 15.4% 8.6% 13.1%
FUND
NIPPON INDIA GILT 14.4% 9.3% 12.4%
FUND
UTI GILT FUND 14% 8.2% 11.9%
5
10
EXCHANGE TRADED FUNDS
Exchange traded funds is an investment fund traded at the stock exchange like stocks are
traded. It holds assets like shares, commodities, bonds to its NAV over the course of the
trading day.

TYPES OF ETF
• Long ETFs
• Inverse ETFs
• Gold ETFs
• Industry ETFs
• Country ETFs
• Leveraged ETFs
• Currency ETFs
• Bond ETFs

ADVANTAGES
• Unlike traditional shares, the ETF can be traded whole day. They offer an opportunity
for speculative traders to bet at the route of shorter time period market moves.
• Exchange traded funds shine on the subject of saving cash. They provide all of
the advantages of the index stock and cost less.
• ETFs are available in on hand while buyers need to create a diversified portfolio.
• ETFs are a favorite amongst the tax aware traders. The precise shape of ETF permits
the investors who're buying and selling in large volumes to acquire in-kind
redemptions.

DISADVANTAGES
• The long-term investors don't enjoy in the intra day pricing changes.
Consequently, they'll alternate greater because of the lagged pricing.
• The niche EFTs has a low volume index.
• The dividend paying yields may be high, but no longer as high as the owing a yield
stock or a group of stocks.
FUNDS NAME 3YEAR RETURNS
NIPPON INDIA ETF NIFTY 14.46%
BeES
NIPPON INDIA ETF LIQUID 4.90%
BeES
UTI GOLD EXCHANGE 5 6.21
TRADED 11
FUND
3. QUESTIONNAIRE

1 Are your employed or self employed?

• Employed
• Self employed
2 Your annual Income?
• 1-3 lakhs
• 1-5 lakhs
• 5-10 lakhs
• 10 lakhs and above
3 How much part of your income you invest?
• 5-20%
• 21-40%
• 41-60%
• 61-80%
4 In which investment do you invest?
• Real Estates
• shares or debentures
• Mutual funds
• FDs/PPF
• Gold
• LIC Policy
5 Do you invest in Mutual Funds?

• Yes
• No
6 Which type of scheme do you prefer most?
• Equity
• Debt
• Balanced
• Sector specific

60
7 Tick the most preferred basis that you consider are important while investing into
Mutual Funds
• Safety
• Liquidity
• Tax benefit
• Reliability
• High return
• Low risk
8 Which of the following source of information influenced you to invest in mutual Funds?
• Friend’s advice’
• Newspaper or Magazines
• Sales Representative
• TV or Internet
9 How long are you planning to stay invested?
• Long term >3years
• Medium term 1-3 years
• Short term <1 year
10 Which among the following principles do you consider while selecting mutual Fund?
• Enquiring the fund manager
• Finding about its past performance
• Identifying your own objectives

61
4. ANALYSIS AND INTERPRETATION OF DATA

Q. 1] Are you employed or self-employed?

OCCUPATION NO. OF NO. OF

RESPONDANTS RESPONDANTS (%)
EMPLOYED 55 73.3%
SELF EMPLOYED 20 26.7%

OCCUPATION

26.7%
EMPLOYED
SELF EMPLOYED
73.3%

DATA INTERPRETATION
• 73% of respondent are employed i.e. they work in any company or organization.
• 27% of respondent are self-employed i.e. they have their own business.

Q. 2] your annual income?

ANNUAL INCOME NO. OF NO. OF

RESPONDENTS RESPONDENTS (%)
1LAKH – 3 LAKHS 24 32%
3LAKHS – 26 34.7%
5LAKHS
5 LAKHS – 10 21 28%
LAKHS
10 LAKHS AND 4 5.3%
ABOVE

62
 ANNUALL INCOME
5.3%

1 - 3 LAKHS
28% 32% 3 - 5 LAKHS
5 - 10 LAKHS
34.7% 10 LAKHS AND ABOVE

• Most of the respondents are from Lower income group i.e. income from 1 lakh to 3
lakhs. Total 32% are from this group and total no. of respondents is 24.
• Majority of the respondents are from lower middle income group i.e. from 3 to 5
lakhs. Total 34.7% are from these group and total no. of respondents is 26
• Here comes the higher middle income group which has income from 5- 10 lakhs and
total no. of respondents are 21.

• This group has least no. of respondent i.e. 5.3% and total 4 respondents. This is
the higher income group with income 10 lakhs and above.

63
Q. 3] How much part of your income you invest?

• Majority of the respondents invest 5% to 20%of their income and remaining used for

saving and for expenses.

• 26 respondents invest 21% to 40 % of their income and remaining used for savings
and expenses

• Around 7 respondents invest 41% to 60% of their income in various investments.

None of the respondent invests 61% to 80% of their income.

Q.4] in which investment do you

invest?

DIFFERENT TYPE NO. OF NO. OF

OF RESPONDENTS RESPONDENTS (%)
INVESTMENTS
REAL ESTATE 12 16%
SHARES/DEBENTU 26 34.7%
RES
MUTUALFUNDS 65 86.7%
FIXED DEPOSITS 13 17.3%
64
 INVESTMENT IN MUTUAL FUNDS

13%
YES
NO
87%

• Majority of respondents invest in Mutual Funds i.e. 86.7% which is 65 respondents.

• Remaining respondents do not invest in Mutual Funds because they may be not
aware of it or they think its riskier or any other reasons.

Q.6] Which type of scheme do you prefer most?

SCHMEMES NO. OF NO. OF

RESSPONDENTS RESPONDENTS
EQUITY 21 32.3%
DEBT 9 13.8%
BALANCED 29 44.6%
SECTOR 6 9.2%
SPECIFIC

SCHEMES
NO. OF RESPONENTS

29

21

9
6

EQUITY DEBT BALANCED SECTOR SPECIFIC

65
 • Majority of the respondents prefer balanced fund scheme, as this give exposure
to both equity and debt fund, so there will be high returns and also safety.

• 21 respondents i.e. 32.3% of the respondents prefer Equity schemes as this

give high returns and are risk taker.

• 9 respondents prefer Debt funds as for safety, tax benefit, etc. and 6
respondents prefer Sector specific schemes for higher returns.

Q.7] Tick the most preferred basis that you consider are important while investing into
mutual funds

BASIS NO. OF NO. OF

RESPONDENTS RESPONDENTS (%)
SAFETY 33 50.8%
LIQUIDITY 13 20%
TAX BENEFIT 29 44.6%
RELIABILITY 7 10.8%
HIGH RETURN 45 69.2%
LOW RISK 17 26.2%

SAFETY 33

LIQUIDIYT 13

TAX BENEFIT 29

RELIABILITY 7

HIGH RETURNS 45

LOW RISK 17

0 10 20 30 40 50

NO. OF RESPONDENTS

66
 • A high return is most preferred basis by respondents while selecting mutual
funds. Also safety and tax benefit is also preferred by respondents as investors
always look for safety while investing and also if they get tax benefit their
expenses will reduce.

SOURCE OF INFROMATION
NO. OF RESPONDENTS
27

17
14

10

FRIEND'S ADVICE NEWSPAPER/JOURNAL SALES REPRESENTATIVE TV/INTERNET

• Low risk is preferred basis by 17 respondents as most of the investors are risk averse.
Liquidity and Reliability is also preferred by 13 and 7 respondents while selecting
mutual funds.

Q.8] which of the following source of information influenced you to invest in Mutual Funds?

SOURCE OF NO. OF NO. OF

INFROMATION RESPONDENTS RESPONDENTS (%)
FRIEND’S ADVICE 17 26.2%
NEWSPAPER/JOURNA 27 41.5%
LS
SALES 14 21.5%
REPRESENTATIVE
TV/INTERNET 10 10.8%

• Most respondents get information about Mutual Funds from Newspaper/Journals

i.e. around 45.5% of the respondent get information from it.
67
 • 17 respondents get information about it through Friend’s advice and 14
and 10 respondents get information of it through Sales representative
and TV/Internet.

Q.9] how long are you planning to stay invested?

DURATION OF NO. OF RESPONDENTS NO. OF RESPONDENTS (%)

INVESTMENT
SHORT TERM < 1 YEAR 6 9.2 %

MEDIUM TERM 1 - 16 24.6 %

3 YEARS
LONG TERM > 3 YEARS 43 66.2 %

DURATION OF INVESTMENT
9.2%
SHORT TERM < 1 YEAR

24.6% MEDIUM TERM 1 - 3

66.2% YEARS
LONG TERM > 3 YEARS

• Majority of the respondents invest their money for long term i.e. more tha3 years,
as this help in growth of the income and it is suitable for equity funds, sector
funds, etc.
• 24.6 % of respondent invest their money for medium term as they can’t wait more
than 3 years or there are various investment for medium term.
• 6 respondent invest their money for short term, so they may be invested their
money in governments or debt funds and they have liquidity also.

Q.10] which among the following principles do you consider while selecting mutual funds?

PRINCIPLES NO. OF NO. OF

RESPONDENTS RESPONDENTS (%)
ENQUIRING 61 95.3%
ABOUT IT TO
FUND MANAGER
FINDING ABOUT 18 28.1%
ITS PAST
PERFORMANCE
IDENTIFYING 5 7.8%
YOUR OWN
OBJEVTIVES
68
 PRINCIPLES WHILE SELECTING MUTUAL
FUNDS
NO. OF RESPONDENTS

ENQUIRING ABOUT THE FUND MANAGER 61

FINDING ABOUT ITS PAST PERFORMANCE 18

IDENTIFYING YOUR OWN OBJECTIVES 5

• Majority of the respondents enquire to their fund manager before investing as the
fund manager has more knowledge than that of investors. Around 61 respondents
enquire to their fund manager.
• 18 respondents of this survey find past performance of the fund while investing to
check whether it has growth or not.
• And around 5 respondents invest by identifying their own objectives. In this question
the respondent can choose more than 1 option so there are many respondent who have
choose 2 or 3 options.

70
5. FINDINGS
• From the survey we found that 27% of the respondents are self and remaining are
employed. And most of the respondent’s annual income is from 5-10 lakhs so most of the
respondents are from middle income group.

• Most of respondents only invest 5% to 20% of their income in investment and remaining
keep for savings and expenses. This tell us even today people fear to invest more amount
of their income in investment due to risk attach with it and their family responsibilities.

And the investors who invest more amount of their income are the one who don’t have
family responsibilities.
• People are aware about mutual funds and their benefits as around 86% of respondent
invest their money in mutual funds. After mutual funds most of the respondents invest in
LIC Policy and shares and debentures. They know the benefit of mutual funds that with
the small amount also they can diversify their portfolio which helps in reducing risk
earning high returns. Also people put their money LIC to secure their life and other
belongings. Through this we get to know that people are aware about Mutual funds and
have at least basic knowledge about it.

• Among total respondents i.e. 75, 10 respondents don’t invest in mutual funds while other
65 invest. This also tells us that most of the people aware about it. And rest who do not
invest maybe don’t have any knowledge and this 10 respondents have annual income
from 1-3 lakhs so they may be thinking that mutual funds need more amount of money to
invest.

• Most of the respondents prefer balanced scheme as this invest in equity and debt both, so
it gives higher return due to equity funds and minimize risk due to debt funds. As before
investing most of the people prefer the fund with safety, high returns and tax benefit.

• Newspapers and journal and friends advice are the main source through which people get
to know about mutual funds. And also most of the people invest for long duration this
tells us that they look for stability of fund and ear higher returns by minimizing risk. As
people who are investing in short term are the one who want to invest in debt funds. As
we get to know that duration is also consider before investing

71
6. CONCLUSION AND RECOMMENDATIONS
CONCLUSION

This study was conducted to know about investor’s preference towards mutual funds and
we get know that most investors prefer mutual funds in order to have high returns at low
level of risk,safety liquidity. The world of investment is changing so accordingly investor’s
pattern is also changing. Investors have their own risk appetite and believe in market
before entering in this volatile market. In this volatile market mutual funds play major role
of giving diversifiedportfolio with low amount money and low risk. In demographic
market we get to know that only 5% to 20% of their annual income is invested. This study
helps us to understand the attitude and behavior of the investor based on their preferences.
In this study we can conclude that people are cautious before investing in any scheme or
fund, as they take all knowledge from the manager before investing. Mutual fund industry
which has enormous growth, if controlled with better management and strict regulations,
the resources can be allocated better in emerging market economy. Also in order to have
more number of investors, mutual fund should bring awareness program about the benefits
and its features of investing mutual funds, and safety security provided by the mutual funds
companies in this changing market condition.

RECOMMENDATIONS

• Before investing investors should compare performances of various mutual fund

schemes offer by various mutual fund companies.
• Before investing investor should take the advice of professional fund manager as he
have more knowledge about various schemes.
• Investors of mutual funds should always be aware about various sectors like
infrastructure, power, pharmaceutical; etc. They should have knowledge about the
market or the schemes in which they have invested or going to invest.
• Investors should be aware not only updates of the schemes but also the latest
regulations and guidelines of SEBI.

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7. BIBLIOGRAPHY

https://www.mymoneymantra.com

https://www.moneycontrol.com/mutualfundindia/

https://www.mutualfundssahihai.com/en

https://cleartax.in/5/mutual-funds

https://www.mutualfundindia.com/

https://www.thebalance.com/2466564

https://www.bankbazar.com/mutual-fund/.html

https://www.shodhganga.com

https://www.irdai.gov.in

https://www,paisabazar.com

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