INDEX

SR.NO
1.
1.1
1.2
2.
2.1
2.2
2.3
2.4
2.5
3.
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
4.
5.
6.
7.
8.

CONTENTS

Page no.

Executive summary
Introduction
Objectives of the study
Research Methodology
Profile: Birla sun life
Introduction
Birla sun life SIP
Benefits of Birla Sun Life
Portfolio management services
Growth portfolio
Conceptual framework
Mutual fund
Procedure of mutual fund
Governance management structure
Mutual Fund Structure
Types of mutual fund schemes
Net asset value
Systematic investment plan
Difference between ULIP and MUTUAL FUND
Collection & Analysis of Data
Interpretation of Data
Conclusion
Suggestion & Recommendation
Appendices
Bibliography

EXECUTIVE SUMMARY
SIP is a method of investing a fixed sum, regularly, in a mutual fund. It is very similar
to regular saving schemes like a recurring deposit. An SIP allows you to buy units on a given
date each month, so that you can implement an investment / saving plan for yourself. Once
you have decided on the amount you want to invest every month and the mutual fund scheme
in which you want to invest, you can either give post-dated cheques or ECS instruction, and
the investment will be made regularly. SIPs generally start at minimum amounts of Rs 1,000

per month and the upper limit for using an ECS is Rs 25000 per instruction. Therefore, if you
wish to invest Rs 100,000 per month, you may need to do it on 4 different dates.
In few years Mutual Fund has emerged as a tool for ensuring ones financial well
being. Mutual Funds have not only contributed to the India growth story but have also helped
families tap into the success of Indian Industry. As information and awareness is rising more
and more people are enjoying the benefits of investing in mutual funds. The main reason the
number of retail mutual fund investors remains small is that nine in ten people with incomes
in India do not know that mutual funds exist.
But once people are aware of mutual fund investment opportunities, the number who
decide to invest in mutual funds increases to as many as one in five people. The trick for
converting a person with no knowledge of mutual funds to a new Mutual Fund customer is to
understand which of the potential investors are more likely to buy mutual funds and to use the
right arguments in the sales process that customers will accept as important and relevant to
their decision.
To understand the concept of investment plan in mutual fund a mutual fund is a type
investment company that invests in a diversified portfolio of securities. To evaluate the
investment processor of the mutual fund: prospective investors who wish to invest in mutual
fund have to contact a distributer / agent of mutual fund to study the benefits of SIP: SIP is
one of the most popular methods of investing. A person can invest in SIP without any fear of
high risk. The data for this report collected on basic of both primary data as well as secondary
data. A questionnaire was constructed for survey to analysis the SIP IN mutual fund for the
investors. This study will help to understand investment pattern of the investor and also the
limitations which are there in SIP.

1. INTRODUCTION
Mutual Funds are a way for a group of investors to pool their money so they can
invest in a wider variety of stocks and bonds. In order to really make wise decisions when
you buy individual stocks and bonds yourself rather than buying a mutual fund, you'd have to
do extensive research on various types of businesses in general (automobile, construction,
medical) and on specific companies (GE, IBM, Microsoft). This is work that most of us are
not interested in or maybe are not capable doing.

The group of investors forms a mutual fund and hires a fund manager. This manager
makes decisions about how to invest the money based on the established goals of the owners
of the fund. Each investor is charged a percentage of his or her investment to help cover all
the costs of running the mutual fund, including having a professional fund manager, and
researching, buying, and selling stocks. The fees are spread out over all the investors, so the
costs to each individual investor are less than it would have been if he or she had purchased
the stocks directly.
In a mutual fund, the value of your shares goes up and down as the value of the stocks
and bonds in the fund rise and fall. Not all funds are managed by a financial manager. Index
funds use a computer program to buy all of the stock in a particular index, such as the Russell
3000 or the S&P 500, regardless of how they're performing. They don't have to do research or
try to time the movement in the market to buy or sell at the "right" time. Index fund fees,
therefore, are generally much lower than the fees for managed funds, and there for the return
on investment is higher.
Mutual funds are means to invest in something along with other people. The
advantage this offers over investing your money individually is having a professional fund
manager whose job is look after the invested funds and make any necessary adjustment
according to his or her knowledge and experience. The mutual fund as a whole amounts to
more money than you could invest alone which may open up possibilities for investment by a
manager who can produce greater returns.
The large size of the portfolio means that the manager can diversify the holdings more
than you could on your own, which spreads the risk. There are a wide range of potentials
purchases for the manager. It is not simple as just buying some stocks or bonds; there are
many variations available for the mutual fund manager to chose from, and you will select the
mutual fund and management according to both the level of risk you find acceptable and your
return. You can invest in money market funds, sector funds, international funds and other
permutations. Successful investing take time, and you will find that, and you will find that the
overall price you pay for professional management is relatively cheap compared with the
value that you will receive.

1.1OBJECTIVE OF STUDY

To study the concept Systematic investment plan in mutual fund

To understand the concept of investment plan in mutual fund

To study the benefits of SIP

To find out the preference of the investors for Asset Management Company.

To know the preference of the portfolios.

To know why one has invested or not invested in mutual fund.

To find out the preferred channels.

To find out what should do to boost the mutual fund industry.

2. PROFILE OF THE COMPANY: Birla Sun Life

2.1 INTRODUCTION
Birla Sun Life Asset Management Company Ltd. (BSLAMC), the investment
managers of Birla Sun Life Mutual Fund, is a joint venture between the Aditya Birla Group
and the Sun Life Financial Services Inc. of Canada. The joint venture brings together the
Aditya Birla Group's experience in the Indian market and Sun Life's global experience.

Established in 1994, Birla Sun Life Mutual fund has emerged as one of India's leading
flagships of Mutual Funds business managing assets of a large investor base. Our solutions
offer a range of investment options, including diversified and sector specific equity schemes,
fund of fund schemes, hybrid and monthly income funds, a wide range of debt and treasury
products and offshore funds.
Birla Sun Life Asset Management Company has one of the largest team of research
analysts in the industry, dedicated to tracking down the best companies to invest in.
BSLAMC strives to provide transparent, ethical and research-based investments and wealth
management services.
Birla Sun Life Asset Management Company follows a long-term, fundamental
research based approach to investment. The approach is to identify companies, which have
excellent growth prospects and strong fundamentals. The fundamentals include the quality of
the companys management, sustainability of its business model and its competitive position,
amongst other factors..
Mission:
To consistently pursue investor's wealth optimization by:

Achieving superior and consistent investment results.

Creating a conducive environment to hone and retain talent.

Providing customer delight.

Institutionalizing system-approach in all aspects of functioning.

Upholding highest standards of ethical values at all times.

2.2 Birla sun life SIP

SIP is an online systematic investment plan (SIP) tool where you can invest through an SIP
online and secure your long term goals with ease.
Features of SIP
Birla Sun Life SIP is the first of its kind in the Indian mutual fund industry. The significant
features are -

Managing your SIP investments is just a click away

Quick and Paperless

Simple 3 step process

Manage your SIP anytime and anywhere

Its easy and secured

You can change your Bank Mandate

Change your Debit Date

Change your Amount

Change your Scheme online

How to invest through SIP

Investing through SIP is a simple 3 step process.
Once you have logged in to our online portfolio management system, click on 'Register for
SIP' and follow the instructions which will guide you through the entire process.

Fill the registration form

Confirm your registration

Login to your banks website and register Birla Sun Life as a Biller

Note your Unique Registration Number (URN) for future reference

Customer Criteria

An existing investor, who has a CIP/TPIN, can avail of this facility by logging in on
our website www.birlasunlife.com

No CIP/TPIN - If you have an investment with us and wish to avail of this facility,
you can generate a TPIN online by visiting our website. Alternately, you can click the
link
Online Account Access - Registration

Do remember, your email id needs to be registered in our records to access your

account online.

To register your email id, please send us a written request by filling up a common
transaction form or by writing a letter and send it to our Authorized Collection Centre.

Availability of Schemes

This facility is offered for schemes where SIP is currently available. Once you login,
you will be able to see a list of schemes which you can then choose to register you SIP.
Minimum amount required to avail SIP services
The minimum amount required to invest is Rs. 500 for ELSS funds and Rs. 1000 for
other schemes
Required time to register for SIP
The minimum duration is 6 months for all investments made under SIP. You can
choose either 'monthly' or 'quarterly' SIP option. Under the monthly option, a minimum of 6
installments can be selected and 4 installments under the quarterly option.
Available date for SIP purchase
An existing investor, who has a CIP/TPIN, can avail of this facility by logging in on
our website You can select any one of the following dates; 1st, 7th, 10th, 14th, 20th, 21st or
28th.
Registration for SIP through Banks
You can register through any of the banks provided in the drop down box. However, you need
to have online access with your bank to avail this facility.
Procedure to follow if the branch and city are not mentioned in the list
If the bank branch and city is not available in the dropdown list, you can mention OTHER in
the space provided next to each option.

Account required to avail SIP facility

You can invest through a current or savings account held with the registered banks.
This facility is currently not available for NRI accounts.

Rejection of SIP
MICR and IFSC codes are mandatory fields.
'Direct' investment
You have an option of investing via a Broker OR Direct. If you want to invest through
a broker then please enter the broker code and 'sub broker' code (if applicable). This will

ensure that your broker gets the brokerage for this transaction. The advantage of investing via
a broker is that you will get sound investment advice.
Applicable charges
This facility comes absolutely free for our investors; however the only charges
applicable will be the load fee (as applicable)

Pop message while choosing the install amount

The load structure will be applicable depending on the scheme you select while
registering for an SIP and on selecting a Direct or Broker investment.

Please read the offer document carefully for information on the load structure for the
scheme you have selected.

Instalments of Rs. 50,000 and above require you to be KYC compliant, the pop up
confirms if you are KYC compliant or not.

If you are not KYC compliant, please click here to find out how you can fulfill the
requirements.

Payment option to avail facility

You can avail of an auto debit facility from your bank account only. Units cannot be
purchased using a debit or credit card.

Guidance after registration

Once you fill and confirm the online registration form, you will be guided to the
website of the bank you selected, once you login with the banks user id and password,
you need to register Birla Sun Life as a payee in order to complete the transaction.

Procedure for Renewal

All you have to do is register for a new SIP via SIP and you can move your entire manual
SIP's to the automatic mode. Please remember that you will need to register one month in
advance.

SIP online Cancelation

Just select the 'My SIP status' under SIP, if multiple SIP's, select the SIP you want to cancel,
answer a few questions and your SIP will be cancelled.

Do remember to cancel the iSIP30 days prior to the next installment date.

Charges occurred while investing in SIP

The load structure will be applicable depending on the scheme you select while
registering for an SIP and on selecting a Direct or Broker investment.

Please read the offer document carefully for information on the load structure for the
scheme you have selected.

Registry Check

Just select the 'My SIP status' under SIP, the 'status' tab will display as 'Registered',
'Active', 'Cancelled', 'Expired' OR 'Closed'.

Registered: - You have created a SIP transaction that will be active once you have
registered Birla as a Biller with the Bank.

Active: - Your SIP is now active in our system and your bank will be debited on the
date you have chosen. (This will only happen after you have registered Birla as a
biller with your Bank)

Cancelled: - Transaction Cancelled by the Investor.

Expired: - Unique Registration Number expired. Therefore, please register for a new
SIP.

Closed: - The SIP term is complete.

Status check
Procedure to be followed by new customers to start investment process with Birla Sun Life
SIP in four easy steps:

Step 1 Visit the SIP Calculator tool to select your SIP amount.

Step 2 Select the mutual fund schemes that suit your investment objectives.

Step 3 Fill-up the Application form Online or download the same. (One application
form for every scheme)

Step 4 Submit the application form along with the first cheque at any of our branch
locations / CAMS locations or to your nearest distributor.

2.3 Benefits of Birla sun life in investing in SIP

1: Wealth Creation solutions

Our Wealth Creation Solutions aim to grow your money through equity/gold investments and
are available in a range of conservative to aggressive options.
These solutions can be ideal for investors who are planning for future expenses, like higher
education of children, marriage, buying a home etc. These solutions are available in the range
of aggressive to conservative options to suit the needs of the investor.
Birla Sun Life 95 Fund
Birla Sun Life Dividend Yield Plus
Birla Sun Life Frontline Equity Fund
Birla Sun Life Gold Fund
Birla Sun Life Equity Fund
Birla Sun Life Index Fund
Birla Sun Life India Gen Next Fund
Birla Sun Life India Reforms Fund
Birla Sun Life Infrastructure Fund
Birla Sun Life International Equity Fund
Birla Sun Life Midcap Fund
Birla Sun Life Top 100 Fund
2: Tax savings
Our Tax Savings Solutions help to reduce your tax burden and at the same
time, aim to grow your money through equity investments.
3: Savings
Our Savings Solutions are aimed at preserving your money, providing you with liquidity and
giving you superior tax-efficient returns compared to bank accounts and FDs.

2.4 Portfolio Management Services (FAQ)

Portfolio Management Service
Portfolio Management Service is a division of Birla Sun Life Asset Management Company
created especially for high net-worth individuals to provide customized solutions for their
financial investment needs.

Difference between PMS & Mutual Fund

The differentiating factor is our customized approach. Our portfolio manager understands
each customer's needs and prepares a model portfolio depending upon his financial goals,
time horizon, investment outlook. The service also offers clients access to sophisticated
investment advisory services aimed at providing strong performance
Beinging
At Portfolio Management Service, our Relationship Manager will have a detailed discussion
with you regarding your financial goals and will engineer a portfolio as per your requirement
across various asset classes. To meet with our Relationship Manager please visit Contact us.
Merits of PMS with Birla Sun Life
PMS with Birla Sun Life offers the following benefits

Institutional quality investment management

Long term track record

No conflict of interest - neither into broking nor investment banking

Emphasis on proprietary research

Adherence to portfolio universe and Disciplined Investment Process

Emphasis on risk management

Strict internal and external compliances

Outstanding responsiveness and comprehensive communication with clients

Returns
Portfolio Management Service offers various products to suit individual investment
objectives. We end eavor to outperform the benchmark indices like Nifty but there can be no
guarantee or certainty of the same. Over long term, equities have outperformed other asset
classes. However the future returns may vary based on market risks.
Tax Structure Applicable
We will provide transaction reports on a regular basis, realized Gain/ (Loss) statement on a
quarterly basis and Audited Financials (on a yearly basis). Tax incidence will arise only after
portfolio action brings in gains (where the client shifts pre-owned stocks)
Note: Taxation being a highly personalized matter, clients are advised to consult their tax

advisors for comprehensive advice with regard to the above and all other allied issues
governing a Privileged Portfolio. We do not offer any tax advice.
Management of Funds
Backed with a strong research team, we have a skilled team of fund managers with requisite
industry and market experience who shall will manage your funds.
Time horizon and lock-in period
The ideal time horizon for a equity portfolio is at least 24-36 months. The lock-in period
varies depending on which product you include in your portfolio.
Terminate PMS before one year
You can terminate from PMS at any time after 30 days. Charges as agreed upon would be
applicable.
Updates Regarding PMS
The Statement of Holding & other relevant details will be available to you online 24 X 7
basis and can be viewed logging in your user ID and the PMSs word that will be supplied to
you. The audited Annual Statements will also be couriered on an annual basis.
NRI CRITERIA
The NRI Docket (consisting of BSL PMS Agreement & Deutsche Bank booklet) duly
completed along with Rupee cheque or Rupee draft should be submitted along with required
documentation. Investors can also lodge their completed application forms with brokers
appointed by BSL PMS for onward submission. All cheques/DDs must be drawn in favour of
investor himself / herself and crossed "A/c payee" only and payable at the place where the
application is submitted at the official point of acceptance. The NRI investor needs to give a
cheque or draft in rupees from his/her NRE, NRO bank account in India. The NRI investor
may also send a rupee cheque/draft issued by an exchange house abroad drawn on its
correspondent bank in India. However, for an NRI to invest it is mandatory that he/she
maintains a bank account in India
ADDRESS FOR COMMUNICATION IN CASE OF NRI
The application form of Birla Sun Life PMS has a provision for local address, but the NRI

Overseas Address is mandatory. If the local address is also provided, in such cases, the Indian
address is registered for the purpose of contact and the foreign as an alternative address.
Will BSL PMS accept an NRI application with an overseas bank account detail
No. Overseas bank account details are not accepted as the payment is in Indian rupees by way
of cheque/direct credits.
Forms

Disclosure Document

Switch Letter Format

Client Mandate Form

Tax Savings
Our Tax Savings Solutions help to reduce your tax burden and at the same time, aim to grow
your money through equity investments.
Benefits from Tax Savings Solutions
Tax saving is important, especially when investors can save up to 30,900 in taxes! Section
80C of the Income Tax Act, 1961 provides options to save tax by reducing the taxable income
by up to 1 lakh. But, wealth creation is also important. Thats why these solutions are ideal
for investors who would like to create wealth along with tax saving.
Tax savings of 30,900 is calculated assuming qualifying amount of deduction is 1 lakh
& investor falls in the top income tax slab of 30% & includes applicable cess. Investors are
advised to consult their tax advisor in view of individual nature of tax benefits.
Further, Tax deduction(s) available u/s 80C of the Income Tax Act, 1961 is subject to
conditions specified therein. Investors are requested to note that fiscal laws may change from
time to time and there can be no guarantee that the current tax position may continue in the
future.

Savings
Our Savings Solutions are aimed at
preserving your money, providing

you with liquidity and giving you

superior tax-efficient returns
compared to bank accounts and
FDs.
Who can benefit from Saving
Solutions
This is an ideal solution for
investors who have low - medium
propensity for risk and high
liquidity. These can be ideal for
first time investors in mutual funds.

Birla Sun Life Cash Manager

Birla Sun Life Dynamic Bond Fund
Birla Sun Life Savings Fund

Regular Income
Our Regular Income Solutions aim to preserve your money and provide regular income.
Who can benefit from Regular Income Solutions
This is an ideal solutions for investors who are interested in alternative modes of regular
income, either in present of after retirement stage, and have low propensity for risk.
Birla Sun Life MIP II Savings 5 Plan

Other funds
The single most important factor that we concentrate upon at Birla Sun Life Mutual Fund is
creating solutions which are fundamentally research based thereby suiting your needs better.
Listed below are solutions created to match the desired investment needs of varied investors.

Birla Sun Life Asset Management Company - The power behind Portfolio Management
Services
Portfolio Management Service is a division of Birla Sun Life Asset Management
Company, investment managers for Birla Sun Life Mutual Fund .Established in 1994, Birla
Sun Life Asset Management Company (BSLAMC) is a joint venture between Adyta Birla
Group, a well known Indian conglomerate and Sun Life Financial Inc, leading international
financial services organization from Canada.
Birla Sun Life Mutual Fund has proved its expertise in both equity & debt fund
management. Its equity schemes have consistently beaten their benchmarks and created
wealth in the long-term for investors.
Our Business
This division of Birla Sun Life Asset Management Company is exclusively for select
investors like you, offering you customized investment solutions built on

in-depth research

innovative products and services and

the highest levels of experience and expertise.

After fully understanding your particular needs, the portfolio manager will put

together an optimal portfolio for you taking into account your financial goals, time horizon,
risk appetite and investment outlook. Using a research-based strategy, he helps you invest in
strong businesses, with quality management and good records, yet trading at reasonable
prices.
Our Investment Philosophy
Our investment philosophy is designed to seek consistent, long-term results by
adopting a research-based, methodical approach to investing.
Our aim is to have investment excellence within the framework of transparent and rigorous
risk control. Our team believes not only in making the most of your money but also in

providing you with extra-ordinary personalized service. The endeavor is to make the
investment process as convenient and personalized as possible to suit your needs.
Portfolio Management Service brings you a whole range of investment products, from which
your portfolio manager puts together your optimal portfolio. We take into account your
financial goals, time horizon, risk appetite and investment outlook. Broadly, the portfolios
can be categorized as:

2.5 Growth Portfolio

Here we concentrate on companies looking to grow by expanding in international markets,
that is, their growth will mainly come from foreign markets.
Ideal if you want...

Higher returns at moderate volatility and risk

Minimum investment amount

Rs. 50 lacs per individual account (or such other amount

as decided by the Portfolio Manager at its sole discretion
in each individual case)

Investment Horizon

Minimum two to three years

Approach

Invest in stocks of companies that can deliver products

and services as good as the best in the world and are
looking at growing through exports

Key Benefits

Reasonably higher growth in portfolio valuation

Invests in growth oriented companies

Effective minimization of the portfolio risk

Core Equity Portfolio (earlier known as Value Portfolio)
This product aims to offer the benefits of both value and growth investing. That is, it targets
businesses priced less than they ought to be yet showing promise for high yields. It seeks to
offer moderate to high capital appreciation and reasonable income in the form of dividends.
Ideal if you want...

Higher returns at moderate volatility and risk

Minimum investment amount

Rs. 50 lacs per individual account (or such other amount

as decided by the Portfolio Manager at its sole discretion
in each individual case)

Investment Horizon

Minimum of one to three years

Approach

Invest in stocks that are inexpensive in terms of valuation

and yet offer high growth potential in terms of forward
earnings

Key Benefits

Strategically designed and diversified

Fairly high margin of safety of capital.
Access to innovative multi asset portfolio

Customized Debt Portfolio

This is an elite service for investors who would like to get optimal returns from a liquid
portfolio consisting of fixed income securities.
Interest rate movement, credit spreads, rate trajectory, macroeconomic environment and the
yield curve gradient are the key drivers for the decision making. Liquidity and quality of
portfolio are the top most priority for creation of the portfolio.

Ideal if you want...

A portfolio of fixed income securities completely

customised to meet your unique needs and preferences

Minimum investment amount

Rs. 50 lacs per account (or such other amount as decided

by the Portfolio Manager at its sole discretion in each
individual case)

Investment Horizon

At least one year or till maturity of the security

Approach

Completely customised to meet the balance of returns and

risk that you want. Overall, superior returns through
prudent portfolio structuring

Key Benefits

Professionally managed by a dedicated manager to

exactly meet your risk-return profile - the sort of
proactive management your money deserves in a
volatile environment
Ears to the ground
Absolute returns
Leverages group capabilities and size

India Reform Portfolio

Ideal if you want...

Higher returns with moderate volatility and risk.

Minimum investment amount

Minimum Rs. 50 lacs per individual account ( or such

other amount as decided by the Portfolio Manager at its
sole discretion in each individual case)

Investment Horizon

Minimum of One to Three years.

Approach

Portfolio seeks to invest in sectors and stocks that are

likely to benefit from the reforms undertaken by the
Government. Reforms could either be in the form of
Single path breaking / Big bang ones or multiple / small
changes. The investment strategy would be a blend of
Top Down and Bottom Up strategies. The Top Down
strategy would be employed to select sectors while the
Bottom Up strategy would be used to select the best
quality companies within the chosen sectors.

Key Benefits

Reforms lead to rerating of Economy, Sectors and

stocks. Gain from the reforms
Typically a Buy and hold portfolio, with portfolio
turnover of less than 2

NCASH
This is for investors who want to make the most of the market volatility by investing in good
stocks whose valuation have been temporarily 'hammered' due to immediate circumstances.
That is, the portfolio is built on the Contrary philosophy.
Ideal if you want...

Higher returns at moderate volatility and risk

Minimum investment amount

Rs. 50 lacs per individual (or such other amount as

decided by the Portfolio Manager at its sole discretion in
each individual case)

Investment Horizon

At least one year

Approach

Invest in stocks available at attractive valuations

(hammered) due to various factors but belonging to
inherently good companies

Key Benefits

Strategically designed and diversified.

Maximize returns for you from these opportunities
Access to innovative multi asset portfolio

High Dividend Yield Portfolio

As the name suggests, this product aims for high to moderate income from dividends and
reasonable capital appreciation. Hence, it targets stocks (a) trading for significantly less than
their peers and the market as a whole and (b) offering high dividend yields.

Ideal if you want...

Moderate returns at low volatility and risk

Minimum investment amount

Rs. 50 lacs per individual account (or such other amount

as decided by the Portfolio Manager at its sole discretion
in each individual case)

Investment Horizon

Minimum of one to three years

Approach

Invest in stocks of those companies which are

inexpensive relative to the overall market, peers and
historical standards and possess high quality
managements, accelerating earnings and healthy balance
sheets

Key Benefits

Invests in attractive dividend yield companies

Higher revenue stream in the form of dividends
Effective minimization of the portfolio risk.

Our Services for NRI's

The huge intrinsic demand in the economy has helped the economy register growth
despite of its peers struggling to keep growing. For NRI investors this translates into a great
opportunity to invest. Indian companies have made their presence felt at the global stage and
these companies are available at attractive valuation as compared to their global counterparts.
With our expertise in wealth management & excellent services, we create wealth and
nurture your hard earned money. We believe not only in making the most of your money but
also in giving you extra-ordinary personalized service
The endeavor is to make the investment process as convenient as possible. Your
Customer Relationship Manager is involved in evolving a portfolio that is best-suited for you.
You can also interact with your Portfolio Manager to discuss your portfolio and
related issues. Both, the Customer Relationship Manager and Portfolio Manager are
accessible to review your portfolio 24 x 7 and handle queries if any. Through our password
protected website, you can have anytime, anywhere access to your investments. We provide
updated information like:

Portfolio disclosure statement where you can review your portfolio in detail

Financial summary comprising the Income Statement and Balance Sheet

Detailed client account statement that allows you to track your inflows and outflows

Transaction statement listing all the transactions made along with Comprehensive
Performance Tracking and Calculations of Capital Gains

3. CONCEPTUAL FRAMEWORK
3.1 MUTUAL FUND

Mutual funds are investment companies that pool money from investors at large and
offer to sell and buy back its shares on a continuous basis and use the capital thus raised to
invest in securities of different companies. In this you amount is invested in different
companies according to percentage ratio.
Mutual funds can be either or both of open ended and closed ended investment
companies depending on their fund management pattern.
Definition of mutual fund: Mutual funds are investment companies that pool money from
investors at large and offer to sell and buy back its shares on a continuous basis and use the
capital thus raised to invest in securities of different companies. In this you amount is
invested in different companies according to percentage ratio.
In addition, mutual funds can be either or both of open ended and closed ended investment
companies depending on their fund management pattern.

An open-end fund offers to sell its shares (units) continuously to investors either in
retail or in bulk without a limit on the number as opposed to a closed-end fund. Open
end fund have no limit in number of shares.

Closed end funds have limited number of shares below are available on best reading
about mutual fund.

MERITS OF MUTUAL FUNDS

Small investments: Mutual funds help you to reap the benefit of returns by a
portfolio spread across a wide spectrum of companies with small investments. Such a
spread would not have been possible without their assistance.

Professional Fund Management: Professionals having considerable expertise,

experience and resources manage the pool of money collected by a mutual fund. They
thoroughly analyse the markets and economy to pick good investment opportunities.

Spreading Risk: An investor with a limited amount of fund might be able to to invest
in only one or two stocks / bonds, thus increasing his or her risk. However, a mutual
fund will spread its risk by investing a number of sound stocks or bonds. A fund
normally invests in companies across a wide range of industries, so the risk is
diversified at the same time taking advantage of the position it holds. Also in cases of
liquidity crisis where stocks are sold at a distress, mutual funds have the advantage of
the redemption option at the NAVs.

Transparency and interactivity: Mutual Funds regularly provide investors with

information on the value of their investments. Mutual Funds also provide complete
portfolio disclosure of the investments made by various schemes and also the
proportion invested in each asset type. Mutual Funds clearly layout their investment
strategy to the investor.

Liquidity: Closed ended funds have their units listed at the stock exchange, thus they
can be bought and sold at their market value. Over and above this the units can be
directly redeemed to the Mutual Fund as and when they announce the repurchase.

Choice: The large amount of Mutual Funds offer the investor a wide variety to choose
from. An investor can pick up a scheme depending upon his risk / return profile.

Regulations: All the mutual funds are registered with SEBI and they function within
the provisions of strict regulation designed to protect the interests of the investor.

3.2 PROCEDURE OF INVESTING IN MUTUAL FUNDS

How to read a Mutual Fund Offer Document

Many people today find that they are deluged with information about investing. News
programs provide updates on the stock market several times a day. Through the
Internet, individuals can check on the performance of their investments at the click of
a mouse. But one of the key sources of investment information, and one that some
investors may be tempted to overlook, is the Mutual Fund Scheme Information
Document and Statement of Additional Information.

A mutual fund scheme information document and statement of additional

information is a legal document that must adhere to standards set forth by the
Securities Exchange Board Of India (SEBI), the regulatory agency that oversees
the Indian Mutual Fund industry. The information contained in the prospectus is
intended to help you understand what types of securities a fund invests in and the
investment philosophy that the Investment Manager uses in selecting individual
securities for the fund. The scheme information document and statement of additional
information will also provide information on the fund's income and expenses, a
review of historical performance, and information about your ability to purchase or
redeem your units. In addition, the scheme information document and statement of
additional information will also outline any loads/sales charges that may apply to your
investment transactions.

By law- mutual fund companies are required to provide you with an scheme
information document and statement of additional information before you make an
initial investment. Before investing, take the time to read this important document.

Questions to ask before investing

A mutual fund scheme information document and statement of additional
information can help you answer the following questions:
In what does this scheme invest?
Is the scheme seeking income or capital growth?
What has been the rate of return?
What are the options available in the scheme (Growth/ Dividend)?

 Is the scheme an open ended / close ended scheme and if there is a lock-in period
applicable?

Key Elements of a Mutual Fund Scheme Information Document and Statement

of Additional Information:
The information contained in a mutual fund scheme information document and
statement of additional information is presented in several sections. As you read
through these sections, you'll want to evaluate how well the fund matches your
investment objectives. Here's a look at key elements that are contained in an Scheme
Information Document and Statement of Additional Information.

Date of issue - A prospectus must be updated at least once in two years.

Minimum investment - Mutual funds differ both in the minimum initial investment
required and the minimum for subsequent investments.

Investment objective - This section states the investment goal of the fund, from
income to long-term capital appreciation, and may state the types of investments that
the scheme invests in, such as government bonds or common stocks. Be sure the
scheme's objective matches your investment goal.

Investment policies - A scheme information document and statement of additional

information will outline the general strategies the Investment Manager will use in
selecting individual securities. This section may provide further information about the
securities in which the scheme invests, such as ratings of bonds or the types of
companies considered appropriate for a fund.

Risk factors - Every investment involves some level of risk. The scheme scheme
information document and statement of additional information will describe the risks
associated with investments in the scheme.

Fees and expenses - Sales and management fees associated with a mutual fund must
be clearly listed.

Tax information - An Scheme Information Document and Statement of Additional

Information will include information on the tax treatment of dividend and capital
gains, including information on deduction of tax at source

Investor services Unit holders may have access to certain services, such as
automatic reinvestment of dividends, systematic investment plan (SIP), systematic
withdrawal plans (SWP) and systematic investment plan for corporate employees.
This section of the prospectus, usually near the back of the publication, will describe
these services and how you can take advantage of them.
A prospectus generally ranges from 20 to 30 pages and includes a table of
contents. The scheme scheme information document and statement of additional
information may be amended from time to time and attaching an addendum which
highlights the changes e.g. change in load structure, introducing of a new facility etc.
usually reflects this. It is therefore important for investors to read the scheme
information document and statement of additional information in detail to be able to
understand the features of the scheme and get the best out of the services offered by
the Investment Manager.

Type of
Mutual
Fund
Schemes
Special
Investment
Structure
Schemes
Objective
Open
Industry
Growth
Ended
Specific
Funds
Close
Funds
Schemes
Income
Index
Ended
Funds
Schemes
Funds
Interval
Balanced
Sectoral
Funds
Funds
Schemes
Money
Market
Funds

Types of mutual fund

Overview10 Steps to invest in Equity

Equity market investments typically yield high returns, particularly if invested over longer
periods of time, although such investments are characterized by a high degree of price
volatility in the short term. The volatility in our markets, particularly in the nineties, reflects
significant shifts in the nature of the Indian economy, with the services sector gaining
increasing importance. This fundamental change in the economy has resulted in a dramatic
change in the nature of our stock markets with the services sector, including technology,
assuming increasing importance. Investment in equities has dismayed many in the short term,
but if executed in the framework of the steps outlined below, may help in better choices.
Step 1:
Identify your objective, given your needs, life stage and resources. If you want to increase the
value of your investment in order to have a larger sum to spend at a later date, your main
priority will be capital growth.
Step 2:
Identify your risk tolerance and then invest appropriately Young people at the start of their
working lives will have a greater appetite for taking financial risk as compared to people at
the end of their career who are looking forward to stable income and preservation of capital.
These two extremes will exemplify the ability to take equity exposure. The young person is
likely to be invested largely in equities for he can afford to take short term capital loss in
anticipation of higher rates of return from equities. The elderly will be unable to take the risk
of capital loss even in the short term as their ability to make back any losses will be limited
by time and ability to earn.
Step 3:
Categorize your stock: Cyclical, Growth or Defensive Investing in cyclical stocks, such as
those in the cement or steel sector, requires an understanding of the economic scenario. An
active involvement in the investment is required in order to reap the maximum benefits of
swings in economic cycles over time. The stock prices are likely to move through extreme
highs and lows, and the ability to time entry and exit will be necessary. Growth investing
refers to stocks in sectors where the future direction is clear for the medium term - such as

technology. However even here, timing is key, for the stock may do nothing for a long time as
momentum builds up and then move sharply thereafter. Defensive investing is that which is
done from a long term viewpoint, where a stock is held on the premise that it will grow
consistently and on a sustainable basis over time, such as those in the fast moving consumer
goods sector. While the appreciation may, at times, not be as dramatic as cyclical or growth
stocks, stocks that constitute defensive investments grow steadily over longer time periods.
Step 4:
Check out the technical position. Can you actually sell your investment when you want to?
The liquidity of a stock is very important in taking an investment decision, for if there is very
little free stock available in the market, buying and selling may well impact the stock price in
an adverse manner. It is interesting to see what the price volume relationship is for a stock. So
if a stock price is moving up or down on high trading volume, it is more likely that there is
real interest in that price movement than if there is very little volume supporting the price
move.
Step 5:
Know what the company does The fate of each stock is tied inextricably to the fortune of the
underlying business, and the market's perception of the future prospects for that business. The
industry's future potential in terms of projected demand-supply is key as is the company's
competitive position in the industry. The business model of the company should be
considered, as well as possible future changes, and the ability of the company to sustain
growth and momentum well into the future.
Step 6:
Know who runs the company The capability and integrity of management is even more
important in determining the future viability of your investment. A strong, credible,
experienced and shareholder responsive management team is critical for operating and
growing a successful company. In the newer areas of our economy, management vision is
also of significant importance.
Step 7:
Know the company's performance The price earnings (P/E) ratio is the often quoted measure
of a company's value. This ratio divides the stock price by the year's earnings, and is useful in

arriving at comparative valuation. But the tool that is quite prevalent in professional
evaluations is the return on equity (ROE), which is the year's earnings divided by the net
worth of the company. This when compared to the cost of capital for the company allows the
investor to gauge the company's wealth creating ability. Apart from the ratios the investor
must also focus on the sustainability of earnings growth.
Step 8:
Know the company's valuation Two stocks may have the same EPS but different P/E's. This
is because ROE may be different and its sustainability may be different. Broadly speaking,
the higher the sustainable ROE, the higher the P/E rating. A high P/E does not therefore
necessarily imply an overvalued stock. Stocks with high sustainable ROEs are likely to trade
at high P/E multiples.
Step 9:
Know the price target Having selected stocks and built a portfolio, it is now imperative to
track these investments closely. One method of doing so is to set expectations, by identifying
a target price, and to re-evaluate the stock when this target is reached. Here, it is important to
consider opportunity costs. If there is a loss on a stock, should one realize that loss and invest
in another stock, which has a greater potential, or should one wait for the loss to turn into a
profit. By not selling out of low return stocks to get into higher return stocks, investors miss
out on opportunities.
Step 10:
Do you want a professional manager? Many investors mistakenly assume that they can
purchase one or two stocks and they will do well. In the absence of good luck, this can be a
dangerous strategy since there is always a risk of a stock declining in value or the business
facing company specific problems. The more diversified the portfolio, lower is the risk of one
poorly performing stock affecting overall performance of the portfolio. However, a good way
of diversifying the portfolio is to invest through mutual funds where the professional fund
manager and the rigorous investment process is likely to limit risk while maximizing profit,
depending on the risk profile of the fund invested in.

3.3 GOVERNANCE, MANAGEMENT STRUCTURE AND SEBI

REGULATIONS

The top management structure of a mutual fund should ensure that the fund is
managed in the best interest of the unit holders in the mutual fund. It is to be noted in this
connection that, unlike the shareholders of a company, the unit holders in a mutual fund do
not have voting rights and have no hand in appointing, supervising or dismissing the funds
top management. The unit holders are simply beneficiaries .Mutual funds original legal
form was that of a trust, as their history in the U.K. shows. The fund was divided into
units for sale to the public. Hence, the name investment trust or unit trust came to be
used. There are three parties to such an arrangement:

trustees who exercise over-all control;

managers who manage the investments from day to day

Beneficiaries or unit holders, i.e. investors.

The question which arises is: How do we ensure that the mutual fund will be managed in the
best interest of the unit holders? This problem is taken care of partly by the regulatory system
and partly by fairly fierce competition among the mutual funds for the investors money.
There areas many as 30 mutual fund organizations in India (see Appendix 1). Each of them
has dozens of mutual fund schemes.

3.4 MUTUAL FUND STRUCTURE

The structure of mutual funds in India is governed by the SEBI Regulations, 1996.
These regulations make it mandatory for mutual funds to have a 3-tier structure of SponsorsTrustee-AMC (Asset Management Company). The Sponsor is the promoter of mutual fund,
and appoints the Trustee. The Trustees are responsible to the investors in the mutual funds,
and appoint the AMC for managing the investment portfolio. The AMC is the business face
of the mutual funds, as it manages all the affairs of mutual funds. The mutual funds and AMC
have to be registered by the SEBI.
Sponsor
Sponsor is the person who acting alone or in combination with another body corporate
establishes a mutual fund. Sponsor must contribute at least 40% of the net worth of the
Investment Managed and meet the eligibility criteria prescribed under the Securities and
Exchange Board of India (Mutual Funds) Regulations, 1996.The Sponsor is not responsible
or liable for any loss or shortfall resulting from the operation of the Schemes beyond the
initial contribution made by it towards setting up of the Mutual Fund
Trust
The Mutual Fund is constituted as a trust in accordance with the provisions of the
Indian Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian
Registration Act, 1908.

Trustee
Trustee is usually a company (corporate body) or a Board of Trustees (body of
individuals). The main responsibility of the Trustee is to safeguard the interest of the unit

holders and inter-alia ensure that the AMC functions in the interest of investors and in
accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations,
1996, the provisions of the Trust Deed and the Offer Documents of the respective Schemes.
At least 2/3rd directors of the Trustee are independent directors who are not associated with
the Sponsor in any manner.
Asset Management Company (AMC)
The AMC is appointed by the Trustee as the Investment Manager of the Mutual Fund.
The AMC is required to be approved by the Securities and Exchange Board of India (SEBI)
to act as an asset management company of the Mutual Fund. At least 50% of the directors of
the AMC are independent directors who are not associated with the Sponsor in any manner.
The AMC must have a net worth of atleast 10 crores at all times.
Registrar and Transfer Agent
The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer
Agent to the Mutual Fund. The Registrar processes the application form, redemption requests
and dispatches account statements to the unit holders.
Custodian
A custodian handles the investment back office of a mutual fund. Its responsibilities
include receipt and delivery of securities, collection of income, distribution of dividends, and
segregation of assets between schemes. The sponsor of a mutual fund cannot act as a
custodian to the fund. For example, Deutsche Bank is a custodian, but it cannot service
Deutsche Mutual Fund, its mutual fund arm.
Depository
Indian capital markets are moving away from having physical certificates for securities, to
ownership of these securities in dematerialized form with a Depository.

3.5 TYPES OF MUTUAL FUNDS

Mutual funds fall into the following categories: money market funds, bonds funds,
stocks funds, balanced funds, and asset allocation funds.

Stock funds
As the name implies, stock mutual funds invest mainly in common stocks.
These stocks may be sold on the New York Stock Exchange, the NASDAQ or other
exchanges.
The objective of a stock fund is long-term capital appreciation versus
generating income (dividends) more common with bond funds. However, stock funds
may generate modest dividends from the stocks in the portfolio and from short-term
cash investments. These stocks tend to be larger capitalized stocks versus smaller
growth stocks.
There are four basic types of stock funds.
1. Large Cap: Primarily invests in "Blue-chip" companies - large, well-known
industrials, utilities, technology, and financial services companies with large
market capitalization. Large cap stocks are perceived to be less risky than
smaller capitalized companies.
2. Mid Cap: Primarily invests in companies whose market capitalization is
smaller than large caps but larger than small caps. Mid caps are generally
considered more risky than large cap stocks but have a higher return
expectation.
3. Small Cap: Primarily invests in emerging companies, thought to have
potential for future growth and profit. Small caps are generally considered the
riskiest stocks compared to larger capitalized firms but carry the expectation of

higher returns. Small cap funds are subject to greater volatility than those in
other asset categories.
4. International: Primarily invests in stocks traded on foreign exchanges but
purchased in the United States by U.S. fund companies. International funds
are subject to additional risks such as currency fluctuation, political instability
and the potential for illiquid markets.
5. Sector: Primarily invests in specific industry sectors such as technology,
financials, health, or energy. Since sector funds focus their investments on
companies involved in a specific industry sector, the funds may involve a
greater degree of risk that an investment in other mutual funds with greater
diversification.
Many investors buy stock mutual funds because, historically, stocks have
outperformed other types of investments over the long term. However, the value
of the stocks in the fund's portfolio may go up or down as the market rises or
declines. Remember, past performance is no guarantee of future results.

Bond funds
Bond funds invest in various types of bonds - issued by corporations, municipalities,
and the U.S. government. Bond mutual funds are designed mostly to provide investors
with a steady stream of income versus capital gains.
Bond Funds
1. Invest in bonds, which are debt securities, or IOUs, issued by corporations or
governments in exchange for money loaned to them. Generally, the issuer
agrees to repay the loan by a specific date and to make regular interest
payments to the lender until then.
2. are a basket of bonds with different durations, yields, credit quality, and
values. Because of this, bond funds never mature as would be the case with
buying an individual bond.
3. Share value and dividends will fluctuate as interest rates fluctuate and new
bonds are purchased or others are sold or mature.
4. Produce profits that consist primarily of dividend distributions.
5. May generate modest capital gains.
6. Fluctuate in value, so it is possible to sell shares at a higher or lower price than
you paid for them.
Bond Fund Types:
1. Government: Primarily invest in bonds issued by the U.S. Department of
Treasury as well as various federal agencies. Government bonds are generally
taxable.
2. Municipal: Primarily invest in municipal bonds issued by state and local
governments and their agencies to fund projects such as schools, streets,
highways, hospitals, bridges, and airports. Municipal bonds can be insured or
non-insured securities. Income generated from municipal bonds may be tax
free at both the federal and state level (consult the funds prospectus).
3. Corporate: Primarily invest in bonds issued by corporations to help fund
business activities. Income from corporate bonds is taxable.
Bond fund shares are not guaranteed and will fluctuate with market conditions and
interest rates and include a greater risk to principal than Certificates of Deposit.
Shares, when redeemed, may be worth more or less than their original cost. Income

may be subject to the Alternative Minimum Tax (AMT) and capital appreciation from
discounted bonds may be subject to state and local taxes.

Money market funds

Money market funds invest in short-term securities such as Treasury bills.
Most money market funds offer a higher rate of interest than bank savings accounts,
and some are free of federal or state taxes. But unlike bank savings accounts, money
market funds are not FDIC insured.
Money market mutual funds are designed to be more stable than stock or bond
funds. Money market funds are designed to provide steady dividend income on the
investment amount, although the yield may fluctuate daily.
Taxable: Invest in short-term obligations from corporations. Tax-free: Invest in
short-term obligations from government entities.

Balanced Funds:
Invest in stocks, bonds, and cash investments, in varying proportions. Produce
dividend and capital gain distributions and share price appreciation in proportion to
their allocation among the three major asset classes.

Asset Allocation Funds:

In an asset allocation fund, the manager will diversify the assets among each
category: cash, bonds, and stocks and weight them according to the portfolio strategy.
The manager will redistribute the weightings according to market conditions.
Portfolio strategies generally differ according to risk tolerance:
1. Aggressive Growth Strategy Portfolio
2. Growth Strategy Portfolio
3. Growth and Income Strategy Portfolio
4. Income Strategy Portfolio
Asset allocation funds are usually made up of a combination of other mutual funds
within the same fund family. As market conditions change, the manager has the
discretion to reduce exposure in one fund and increase it in another. Just about all
mutual fund families allow you to switch between funds in the same family and class
(A, B, or C shares) without incurring any costs.

3.6 NET ASSET VALUE (NAV)

Once a mutual fund scheme has been floated, the buying and selling prices of its units from
day to day are related to the NAV of the units according to the regulations of SEBI. It is
important for investors to understand the NAV concept.
Daily NAV
A mutual fund is required to compute the NAV once a day based on the closing market prices
by valuing all assets and liabilities at their current values.
NAV per unit
The steps involved in computing the NAV per unit are as follows:
(a) Compute the aggregate assets of the fund as a whole atcurrent values.
(b) Compute the aggregate liabilities at current values.
(c) Compute the aggregate NAV i.e. (a) minus (b).
(d) Compute the per unit NAV by dividing the aggregate NAV by the total number of units
outstanding. That is:

Aggregate NAV
NAV of per unit = --------------------------------No. of units outstanding
Watch the NAV per unit
Just as investors in shares watch the share prices in order to know how their
investment is faring, a mutual fund investor can keep track of the progress of the fund by
looking at them movement of the NAV per unit.
Mutual fund and stock market relationship
Remember that the NAV per unit of an equity fund is linked to the value of the funds
portfolio, which, in turn, is related to the ups and downs of the stock market. The fickleness
of the equity market as a whole affects the mutual fund investors through its effect on the
NAV per unit. Such fickleness sometimes borders on madness because it has no link with
fundamental factors. It is best brought out by movements of the markets P/E ratio.

SEBI Regulations
The AMC (Asset Management Company) charges an investment advisory fee to the
mutual fund. In addition, the day to day running expenses are also chargeable to the mutual
fund.
If the AMC is lavish, careless or unscrupulous in spending, the net return to investors
will be adversely affected. Hence, SEBI regulations have laid down in detail what and how
much can be charged to the mutual fund in the form of advisory fees and expenses.
The SEBI regulations have laid down sub-limits for (a)investment advisory fee, and
(b) other recurring expenses and also an over-all limit for the two combined. Expenses which
are not expressly allowable have to be borne by the AMC. (For example, expenses of
account maintenance are the AMCs responsibility. There could be others, like rental for
office space).The over-all limit on advisory fees plus recurring expenses, which the AMC
can charge to the fund, is prescribed as a percentage of average weekly net assets,
indicated below:
Average Weekly Net Assets

over-all limit on fees and expenses

(1)First Rs 100 crore

2.50%

(2)Next Rs 300 crore

2.25%

(3)Next Rs 300 crore

2.00%

(4)Additional assets

1.75%

Note: The percentages mentioned are applied to the average weekly net assets.
In the case of bond schemes, the percentage is required to be lower by at least 0.25% than the
above-mentioned figures.
Within the over-all limit mentioned above, there is a sub-limit for advisory fees as follows:
Average Weekly Net Assets
(1) Rs 100 crore
(2) Excess over Rs 100 crore

Sub-limit on advisory fees

1.25%
1.00%

The difference between the combined over-all limit(mentioned in Para 38 above) and
the sub-limit for advisory fee represents the sub-limit for allowable recurring expenses. These
expenses comprise brokerage and transaction cost, registrars services, custodian fees, audit

fees, trustees fees and expenses, investor communication expenses, insurance premium and
statutory advertisement costs.

Initial launching expenses

The initial launching expenses of a scheme are also regulated by SEBI as a separate category.
SEBI regulations allow these expenses up to a maximum limit of 6% of the initial resources
raised. Till recently, the regulations required that if the initial expenses exceeded 6%, the
excess will have to be borne by the AMC. A recent change disallows initial expenses beyond
6% even if the AMC is prepared to bear the excess. Ostensibly, this change has been made to
stopping healthy competition among mutual funds.
Load funds and no-load funds
No-load funds are those funds which do not charge an initial entry-fee from investors.
On the other hand, load funds charge an entry fee. In the case of schemes launched on no
load basis, the AMC is permitted to recover the launching expenses by increasing the
investment management advisory fee slightly, i.e. by up to 1% of the average weekly net
assets. Some investors may get attracted into a scheme because it charges no entry fee but
this advantage is, more or less, cancelled out by higher advisory fee and exit fee.
Are no-load funds preferable?
In the case a load-fund which has an entry fee of, say, 6%,for every Rs. 100 paid by the
investor, the amount actually invested on his/her behalf will be Rs. 94 only. On the other
hand, in the case of a no-load fund, the full amount of Rs. 100 paid by the investor is
available to be invested on his/her behalf but the fund is allowed to charge an additional 1%
advisory fees in lieu of not charging an entry fee.
There is thus a trade-off. The difference between the two alternatives does not seem to be
significant from the long-term angle. Usually, in the case of no-load funds, the investor has to
pay up to 1% additional advisory fee and also an exit charge if he/she exits from the fund
within a short period. In the case of load funds which levy an entry fee, there is generally no
exit charge.
Example

Consider the following simplified example: Monthly investment is Rs. 1000 for the next 12
months. The a mount is invested each month immediately in units of an equity scheme at the
ruling price of units.
Assumption-1 (Declining Prices): The price per unit is Rs.16 for first 8 months and Rs 10 per
unit for last 4 months.(This is a simplification. The price for each month would ordinarily be
different.) Under this assumption, against Rs.1000 per month paid by the investor, the
number of units purchased will be 500 in the first 8 months and 400 in the last 4 months.
Thus the total number of units purchased over12 months will be 900 at a cost of Rs. 12000.
There demption of the accumulated units is done always at the closing NAV. As per our
assumptions, the accumulated units are 900 and will fetch only Rs. 9000 at the closing NAV
of Rs. 10 per unit. The investor suffers a loss of Rs.3000 on the total amount invested (Rs.
12000 9000).
Assumption-2 (Rising Prices): The ruling prices of units are reversed, being Rs. 10 for first 8
months and Rs. 16 for last 4 months. The number of units bought for the investor will be 800
in the first 8 months and 250 in the last 4months. The total number of units accumulated over
the 12months will be 1050 for Rs. 12000. These 1050 units will fetch Rs. 16800 at the
closing price of Rs. 16 per unit. There is a total gain of Rs. 4800 for the investor (Rs. 16800
12000).
The example given above brings out that the crucial factor show the ruling price behaves over
the period of SIP. In the real world, no one can predict the pattern of prices which will prevail
in the future over the next 12 months or a longer period of some years. The most
advantageous situation for the investor is when his/her over-all buying cost is the least and
the realisable price on completion of the investment plan is the highest
An investor, who joins the SIP at a wrong time (i.e. when the equity prices are all-time high),
will be in an unfortunate situation unless the prices rise further in the future. Thus, we see that
the averaging of price over the period of SIP does not always insulate the small investors
against the markets volatility.
In the case of SIP, the possibility of loss can be avoided by not starting at the wrong time (i.e.
when equity prices are too high). We should bear in mind the fact that the Indian stock market
is far more volatile than the developed markets, like U.S. and U.K. If we look at the
movements of BSE Sensex, significant fall or rise of 20-25% within a few months is fairly
common. The SIP provides a very imperfect solution to the problem posed by markets high
volatility.
Caution needed

The investor should not take it for granted that SIP is always advantageous. The price level at
the starting point is particularly important, as illustrated above. The price level at the end of
the period chosen is also critical. The rigidity of most SIP schemes can be both inconvenient
and, disadvantageous to the investors. The investor should avoid a situation of forced
redemption of accumulated units at, unduly low price by building some flexibility in the
choice of redemption date

3.8 SYSTEMATIC INVESTMENT PLAN (SIP)

A systematic investment plan (SIP) commits the investor to invest a specified amount every
month (or every quarter) in the units of a funds equity scheme. The number of units bought
each month for the investor under the plan will depend on the ruling price: fewer units are
bought when the price is high, and more units are bought when price is low. This is a built-in
advantage of SIPs. It averages out investors buying price over the entire period of holding.
The SIP resolves a dilemma often facing investors due to ups and downs in the market price.
The investor finds it difficult to decide when to invest in the equity scheme.
The monthly or quarterly amount to be invested can be as small as Rs. 500 or Rs.
1000. Mutual funds specify the schemes for which SIP is allowed by them. Some funds
charge a lower entry load under SIP than for one-time investment, but others dont make any
such distinction. An exit load under SIP is charged if the investor leaves the scheme before a
specific period of time.
USE of SIP before investing
Investing through SIP in a mutual fund indubitably is the key solution in order to avoid or
prevent the loopholes of equity investment and yet, continually enjoy the high returns of
investment. Obviously, yes! And not only that, it makes all the more sense today when the
stock markets are booming and are tempting to really invest.
1. Tension free investment: Experts and other well versed people in this business who will
definitely manage your money and other forms of investment is one of the key advantages of
investing through a mutual fund. They regularly carry out extensive research on the
company, the industry and the economy thus ensuring informed investment. This then is
one big advantage in view of investing your hard earned money.
In addition to that, they regularly track the market. Thus, for many of us who do not have the
desired expertise and are too busy with our vocation to devote sufficient time and effort to
investing in equity, mutual funds offer an attractive alternative. Therefore, indubitably this
type of business is indeed, a tension-free form of investment.

2. SIP invest money in different-different sector: Another advantage of investing through

mutual funds is that, even with just small amounts we are able to enjoy the benefits of
diversification. Huge amounts would be required for an individual to achieve the desired
diversification, which would not be possible for many of us.
3. Its well-regulated: It is interesting to note that the mutual fund industry is well regulated
both by Sebi (Securities and Exchange Board of India) and AMFI (Association of Mutual
Funds in India). They have, over the years, introduced regulations, which ensure smooth and
transparent functioning of the mutual funds industry. Moreover, you can also change mutual
fund time by time, switch in different mutual fund, this is one of the big profit.
4. Does not after our monthly budget: Furthermore, with SIP we can invest small amounts
(Rs 500-Rs 1,000) periodically in Mutual funds as against larger one-time investment
required, if we were to buy directly from the market. In this way, an investment does not
appear to be a burden every month. On the other hand, to prevent losses in volatile markets,
investing in Sips is the best option as every month you may get an opportunity to buy at
lower levels.
5. Reduces the average cost: Another advantage in using SIP is the fact that it reduces the
average cost. In SIP we are investing a fixed amount regularly. Therefore, we end up buying
more number of units when the markets are down and NAV is low and less number of units
when the markets are up and the NAV is high. This is called rupee-cost averaging. In
addition, we would stay away from buying when the markets are down. We generally tend to
invest when the markets are rising. SIP works as a good discipline as it forces us to buy even
when the markets are low, which actually is the best time to buy.
6. Helps to fulfill our dreams: Finally and the best part of all is the fact that with the use of
SIP, it will make our dreams come true. The investments we make are ultimately for some
objectives such as to buy a house, childrens education, marriage etc. And many of them
require a huge one-time investment.As it would usually not be possible to raise such large
amounts at short notice, we need to build the corpus over a longer period of time, through
small but regular investments. This is what SIP is all about. Small investments, over a period
of time, result in large wealth and help fulfill our dreams & aspirations.

SIP SCORE
It makes you disciplined in your savings. Every month you are forced to keep aside a
fixed amount. This could either be debited directly from your account or you could give the
mutual fund post-dated cheques.
As you see above, it helps you make money over the long term. Since you get more
units when the NAV drops and fewer when it rises, the cost averages out over time. So you
tide over all the ups and downs of the market without any drastic losses.
Also, a number of mutual funds do not charge an entry load if you opt for an SIP. This
fee is a percentage of the amount you are investing. And if you do not exit (sell your units)
within a year of buying the units, you do not have to pay an exit load (same as an entry load,
except this is charged when you sell your units).If, however, you do sell your units within a
year, you would be charged an exit load. So it pays to stay invested for the long-run.
The best way to enter a mutual fund is via an SIP. But to get the benefit of an SIP, think of at
least a three-year time frame when you won't touch your money. Of course you would lose
money if your units lost value over time.
Most SIP Mutual funds don't tell you is that they recover their fees as monthly charges
by selling your units, so while you are buying more units when the market is down, more of
your units are also being sold to fund the monthly charges of the Mutual fund. Also the Bid
and Offer of the Mutual Fund is around 7% and this is the front load or expense you pay for
buying the units each month. Also sometimes the Mutual fund will have annual fee charges.
In spite of the above drawbacks the retail investors' benefit in the long term horizon of
58 years is enormous. Only make sure that you can switch your funds from stock market to
money market at short notice when the markets are really in a correction phase to safeguard
the profits which you have made when the market was in a booming phase. This is easier said
than done.
SIP will work best if markets trend lower after your investment. SIP performance would be
average if markets trade in a range. SIP will perform worst if markets trend higher.

Another Benefit of investing in mutual funds via SIP is you benefit

It cannot be claimed that the SIP is always more advantageous than a lump sum
investment. It all depends on the course of equity prices which form the basis for
computing the price of units.

If over the total period of holding, the prices have been generally declining, the SIP
would cause a loss: there demption amount (based on NAV at the end) paid to the
investor for the accumulated units in his/her account would be less than the total cost.
In the opposite case of rising prices, the SIP would be advantageous.

3.8 ULIPs vs Mutual Funds

ULIPs

Mutual Funds

Investment amounts

Determined by the
investor and can be
modified as well

Minimum investment amounts are determined

by the fund house

Expenses

No upper limits,
expenses determined by Upper limits for expenses chargeable to
the insurance company investors have been set by the regulator

Portfolio disclosure

Not mandatory*

Modifying asset
allocation

Generally permitted for Entry/exit loads have to be borne by the

free or at a nominal cost investor

ax benefits

Benefits

Quarterly disclosures are mandatory

Section 80C benefits are

available on all ULIP Section 80C benefits are available only on
investments
investments in tax-saving funds
Provides flexibility in Professional investment management,
investment,
diversification, low cost, convenience and
transparency, liquidity, flexibility, easy in investing, market cycle
disciplined and regular planning, easy withdrawal ,investor
saving, multiple benefit information dividend options, safekeeping,
bundled in one product, online service.
spread of risk

4.Collection and Analysis Of data

Q.1 What type of investment you prefer the most?

Analysis : The analysis shows that investors prefer to invest in fixed deposits 30% , saving
account 26% ,gold/silver 20% , mutual fund 10% ,insurance 8% , real estate 8% ,
shares/debentures 2% and PPF 0% .

Q.2 While investing your money, which factor you prefer most?

Analysis :The factors preferred the most are liquidity 42% , high return 30% , low risk 25%
and company reputation

Q.3 Have you ever invested your money in mutual fund?

Analysis : The analysis is 100% yes as the survey is done with the investor who invest in
different avenues.

Q. 4 Which feature of mutual fund allure you most?

Investors allure

Q.5 In which Mutual Fund you have invested?

Analysis : In investing in mutual fund people mostly preferred 36% in UTI, 20% in SBIMF ,
18% in RELIANCE , 12% in OTHER SPECIFY , 8% ICICI PRUDENTIAL ,6% in HDFC
and 0% in JM MUTUAL FUND.

Q.6 When you invest in Mutual Funds which mode of investment will you prefer?

Analysis :The analysis shows that 82 % of investors the systematic investment plan and 18
% invest in one time investment

Q.7 From where you purchase mutual funds?

Analysis : Investors mostly purchase 57% from other sources , 18 % brokers only , 16 %
directly from the asset management company and 9% from brokers / sub- brokers.

Q.8 Which AMC (Asset Management Company) you prefer most?

Analysis : The Asset Management Company preferred by the investors are 24% in UTI ,
20% in ICICI , 16 % in HDFC , 14 % in RELIANCE and SBIMF , and 6 % in JM Finance
and KOTAK

Q.9 Which sector are you investing in Mutual Funds sectors?

Analysis : Investors mostly prefer the following sector 30% in GOLD FUND , 24% in
GENERAL , 14 % in REAL ESTATE , 10 % in DIVERCIFICATION IN EQUITY FUNDS
and DEBT FUNDS , 2 % in power sec

Q.10 How much % of your income you trade in Mutual FLess than und?

ANALYSIS : The percentage of their income they invest 46 % in Less than 5% , 34 % in 5%10% , 11% in more than 10% and 9% dont trade.

Q.11 what is your primary investment purpose in mutual fund?

Analysis : The primary investment purpose of investors in mutual fund is like that they invest
30% in Others ,28 % in Retirement Planning and Future Education Of Children and 14% in
Building.

Q.12 Over the long term what do you think is a realistic overall returns on your investment?

Analysis : the investors can be optimistic to earn high or extra ordinary returns so expected
returns as 36% in 5% - 7% , 28% in 7% - 9% , 22% in 4% - 6% AND 14 % IN MORE THAN
10 %.

Q.13 How would you like to receive the returns every year?

ANALYSIS : Investors expects way of returns preference as 46% in Dividend Payout , 36 %

in Dividend Re-investment , and 18% in Growth in NAV.

Q.14 I plan to begin taking money from my investment in..

Analysis : the investor expects returns from his investment as 42% in 1-2years , 28% in
1year ,16% in more than 5 year and 14 % in 3-5years

Q.15 As I withdraw money from this investment I plan to spend it over a period of .

Analysis : investor plan to spend over a time period of 42% in period of 2 year or less , 26%
in 3-5years , 18% in 6-10 years and 14% in more than 10years.

Q.16 Generally I prefer an investment with little or ups or down in value and I am willing to
accept the lower returns these investment make.

Analysis : Investors think in following ways 40% says I somewhat agree ,30% says I agree ,
20% says I strongly agree , 10 % I strongly agree.

Q.17 When the market goes down I tend to sell some of my riskier investment and put the
money in safer investment?

Sell their risier

Analysis : investors mostly sell their riskier investment and put in safer investment ; 48% of
investor Agrees , 22% goes for I strongly disagree , 16% says I strongly Agree , and 14 %
says I somewhat agree.

Q.18 Dealing period in Mutual fund?

Analysis : investors mostly invest in period of 44% in more than 1 month , 34 % in monthly
basis , 22% in more than 2 months and 0% in weekly basis.

Q.19 Over the long term what do you think is a realistic overall returns on your investment in
mutual funds??

Analysis : investors prefers 36% in 7% - 9% , 34% in 5%-7% 20% in more than 10% and
10% in 4%-6%.

Q.20 How important are tax consideration in your investment strategy??

Analysis : investors think in following way 48% says somewhat important , 32% says very
important , 12% says Extremely important and 8 % says not important at all

6. Suggestion and recommendation

There is no such thing as an ideal mutual fund portfolio that can suit need and risk appetite of
each and every individual. While there is no dearth of good mutual funds in the market today,
building a portfolio depends on preferences and objectives of each individual.
The factors that come into play include age of the investor , risk appetite , time at hand to let
investment grow, need for money- immediate or later and more importantly , the purpose of
making such an investment. Broadly we have Aggressive, moderate and Conservative
portfolios where each of them incorporates a different genre of mutual fund schemes to suit
varying needs.
An individual should work towards building a stable portfolio which includes large cap funds
to provide your portfolio required stability, funds with proven track record and maybe some
aggressive funds to spice up your portfolio. I will advise investors to understand their risk
profile and invest accordingly.
Mutual fund companies should dispatch their annual report in time to their investors so that
the investors are informed about the companys financial position. This will help the investor
to know the status of their investment.
It is suggested that the investors should not consider only one or two factors for investing in
mutual fund but they should consider other factors such as higher return, degree of
transparency, efficient service, fund management and Reputation of mutual fund in selection
of mutual funds.