“MUTUAL FUNDS OR ETF’s”

A report submitted in partial fulfillment of

PGDM Programme 2017-2019

Submitted By: - Faculty Guide:-

Ayushi Jain Prof. Indira Bharadwaj
PGDM 2nd year
201705058

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 DECLARATION

I hereby declare that this project report “Mutual Funds or ETF’s”is my own
work, to the best of my knowledge and belief. It contains no material previously
published or written by another person nor material which to a substantial extent
has been accepted for the award of any other degree or diploma of any other
institute, except where due acknowledge has been made in the text.
Signature: ____________________
Name- Ayushi Jain
Roll no. 201705058
2017-2019
Date:- _______________

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 ACKNOWLEDGEMENT

I would like to thank my mentor and professors at Delhi School of Business, for
their guidance and constant supervision as well as for providing necessary
information regarding the project & also for their support in completing the
project. I am sincerely grateful to them for sharing their truthful and illuminating
views throughout my Masters course.

I express my sincere thanks to my mentor Prof. Indira Bharadwaj for kind co-
operation and encouragement which help me in completion of this project.

My thanks and appreciations also go to my colleagues in developing the project

and people who have willingly helped me out with their abilities

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 Table Of Contents
Chapter no.1 Topic Page No.
1 Summary 5
2 Introduction to 7
Mutual Funds
3 Introduction to 12
ETF’s
4 Performance of 18
ETF’s in recent
years
5 The case of 21
ETF’s in three
charts
6 Data Analysis 24
7 Findings 29
8 Recommendatio 30
ns and
Conclsions
9 Questionnaire 31
10 References 34

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SUMMARY
Exchange-traded funds (ETFs) are increasingly finding favour in the global
financial markets; foreign institutional investors (FIIs) in particular are using ETFs
to gain exposure to emerging markets. In India, ETFs are making their presence
felt gradually. In fact, ETFs are one of the disinvestment modes proposed by the
Indian government for public sector undertakings (PSUs). After liberalisation in
1991, FIIs have played a significant role in the Indian stock market. It has been
estimated that a sizable chunk of FII flows comes through offshore and India-
focused equity funds and ETFs.
Exchange-traded funds are one of the best known innovations in financial markets.
ETFs hold assets such as stocks, commodities, or bonds, and trade close to their net
asset value (NAV) throughout the day. ETFs can track a specific index, a particular
sector of an industry, or even the stock markets of a foreign country. ETFs that are
passively managed and track their benchmark indices are known as classical ETFs.
ETFs combine the positive aspects of closed-ended and open-ended mutual funds.
ETFs have several advantages over traditional mutual funds, such as lower expense
ratios, trading flexibility, tax efficiency, transparency, and exposure to diverse
asset classes. Mutual funds have higher expense ratios than ETFs because of entry
and exit loads. It is pertinent to note that in India, entry loads for mutual funds
have been banned while exit loads do exist. ETFs can be traded like stocks
throughout the day while open-ended mutual funds can be accessed only at the end
of the day
The heightened market volatility in 2018 took a toll on the performance of large
cap schemes as exchange-traded funds—which track an index, a commodity,
bonds, or a basket of assets—managed to beat “actively managed funds” by
providing superior returns to investors during the year. ETFs are managed
passively and provide returns very similar to that of its underlying index.
There is a certain section of people who believes that ETF’s are a strong alternative
to large cap funds. Also people are more comfortable in investing mutual funds.
An awareness needs to be created for ETF’s.

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Objective of the study
i. To understand the perception of people in terms of investing in the mutual
funds or ETF’s.
ii. To measure and compare the performance of mutual funds and ETF’s.
iii. To analyze the trends of returns of mutual funds and ETF’s.
iv. To study the profile, attitude and preferences through a questionnaire.

Limitations of the study

There are three major limitations in this study that could be addressed in future
research. First, the sample size was limited due to exact perception required in the
study was not received in the questionnaire. Second there was no sufficient sample
size in order to conclude a valid research valid. Third, limited access to data.

Research and Methodology

 Mail Questionnaire. This sort of questionnaires involves the researcher to
send the questionnaire list to respondents through post, often attaching pre-
paid envelope. Mail questionnaires have an advantage of providing more
accurate answer, because respondents can answer the questionnaire in their
spare time. The disadvantages associated with mail questionnaires include
them being expensive, time consuming and sometimes they end up in the bin
put by respondents.
 Data source. This study is based on primary and secondary data.
i. Primary data has been collected through questionnaire.
ii. Secondary data has been collected through websites In addition to the above,
different articles and opinions of fund managers have been collected from
the magazines like Capital Market, Chartered Financial Analyst and Mutual
Fund Insight.
 Data Analysis. The data collected from various sources have been analyzed
by using different techniques as bar diagrams and graphs are widely used.

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Mutual Funds
A mutual fund collects money from investors and invests the money on their
behalf. It charges a small fee for managing the money. Mutual funds are an ideal
investment vehicle for regular investors who do not know much about investing.
Investors can choose a mutual fund scheme based on their financial goal and start
investing to achieve the goal.
Mutual Funds are registered with SEBI (Securities and Exchange Board of India)
that regulates security markets prior to the collection of the funds from the
investors. Investing in a Mutual Funds can be simple buying or selling stocks or
bonds online. Moreover, investors can sell out their shares whenever they want or
need.
By law, each mutual fund is required to file a prospectus and regular shareholder
reports with the SEC. Before you invest, be sure to read the prospectus and the
required shareholder reports. Additionally, the investment portfolios of mutual
funds are managed by separate entities known as “investment advisers” that are
registered with the SEC. Always check that the investment adviser is registered
before investing.

Risk and Return Relationship

Risk/Return Tradeoff is all about achieving the fine balance between lowest
possible risk and highest possible return. Low levels of risk are usually associated
with low potential returns while higher levels of risk are normally expected to yield
higher returns. The graph below depicts the typical risk / return relationship.

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Types of funds
Most mutual funds fall into one of four main categories – money market funds,
bond funds, stock funds, and target date funds. Each type has different features,
risks, and rewards.

 Money market funds have relatively low risks. By law, they can invest only
in certain high-quality, short-term investments issued by U.S. corporations,
and federal, state and local governments.
 Bond funds have higher risks than money market funds because they
typically aim to produce higher returns. Because there are many different
types of bonds, the risks and rewards of bond funds can vary dramatically.
 Stock funds invest in corporate stocks. Not all stock funds are the same.
Some examples are:
 Growth funds focus on stocks that may not pay a regular dividend but have
potential for above-average financial gains.
 Income funds invest in stocks that pay regular dividends.
 Index funds track a particular market index such as the Standard & Poor’s
500 Index.
 Sector funds specialize in a particular industry segment.
 Target date funds hold a mix of stocks, bonds, and other investments. Over
time, the mix gradually shifts according to the fund’s strategy. Target date
funds, sometimes known as lifecycle funds, are designed for individuals
with particular retirement dates in mind.

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Advantages of Mutual fund

a. Liquidity
Unless you opt for close-ended mutual funds, it is relatively easier to buy and exit
a scheme. You can sell your units at any point (when the market is high). Do keep
an eye on surprises like exit load or pre-exit penalty. Remember, mutual fund
transactions happen only once a day after the fund house releases that day’s NAV.

b. Diversification
Mutual funds have their own share of risks as their performance is based on the
market movement. Hence, the fund manager always invests in more than one asset
class (equities, debts, money market instruments etc.) to spread the risks. It is
called diversification. This way, when one asset class doesn’t perform, the other
can compensate with higher returns to avoid the loss for investors.

c. Expert Management
Mutual fund is favored because it doesn’t require the investors to do the research
and asset allocation. A fund manager takes care of it all and makes decisions on
what to do with your investment. He/she decides whether to invest in equities
or debt. He/she also decide on whether to hold them or not and for how long.

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Your fund manager’s reputation in fund management should be an important
criterion for you to choose a mutual fund for this reason. The expense ratio (which
cannot be more than 1.05% of the AUM guidelines as per SEBI) includes the fee
of the manager too.

d. Less cost for bulk transactions

You must have noticed how price drops with increased volume, when you buy any
product. For instance, if a 100g toothpaste costs Rs.10, you might get a 500g pack
for, say, Rs.40. The same logic applies to mutual fund units as well. If you buy
multiple units at a time, the processing fees and other commission charges will be
less compared to when you buy one unit.

e. Invest in smaller denominations

By investing in smaller denominations (SIP), you get exposure to the entire stock
(or any other asset class). This reduces the average transactional expenses – you
benefit from the market lows and highs. Regular (monthly or quarterly)
investments as opposed to lump sum investments give you the benefit of rupee-
cost averaging.

f. Suit your financial goals

There are several types of mutual funds available in India catering to investors
from all walks of life. No matter what your income is, you must make it a habit to
set aside some amount (however small) towards investments. It is easy to find a
mutual fund that matches your income, expenditures, investment goals and risk
appetite.

g. Cost-efficiency
You have the option to pick zero-load mutual funds with less expense ratios. You
can check the expense ratio of different mutual funds and choose one that fits in
your budget and financial goals. Expense ratio is the fee for managing your fund. It
is a useful tool to assess a mutual fund’s performance.

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Disadvantages of Mutual Funds

a. Costs to manage the mutual fund

The salary of the market analysts and fund manager basically comes from the
investors. Total fund management charge is one of the main parameters to consider
when choosing a mutual fund. Greater management fees do not guarantee better
fund performance.
b. Lock-in periods
Many mutual funds have long-term lock-in periods, ranging from 5 to 8 years.
Exiting such funds before maturity can be an expensive affair. A certain portion of
the fund is always kept in cash to pay out an investor who wants to exit the fund.
This portion in cash cannot earn interest for investors.

c. Dilution
While diversification averages your risks of loss, it can also dilute your profits.
Hence, you should not invest in more than 7-9 mutual funds at a time.

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Exchange Traded Funds (ETF’s)
Exchange Traded Funds are essentially Index Funds that are listed and traded on
exchanges like stocks. Until the development of ETFs, this was not possible
before. Globally, ETFs have opened a whole new panorama of investment
opportunities to Retail as well as Institutional Money Managers. They enable
investors to gain broad exposure to entire stock markets in different Countries and
specific sectors with relative ease, on a real-time basis and at a lower cost than
many other forms of investing.

An ETF is a basket of stocks that reflects the composition of an Index, like S&P
CNX Nifty or BSE Sensex. The ETFs trading value is based on the net asset value
of the underlying stocks that it represents. Think of it as a Mutual Fund that you
can buy and sell in real-time at a price that change throughout the day.

An ETF combines the valuation feature of a mutual fund or unit investment trust,
which can be bought or sold at the end of each trading day for its net asset value,
with the tradability feature of a closed-end fund, which trades throughout the
trading day at prices that may be more or less than its net asset value. Closed-end
funds are not considered to be ETFs, even though they are funds and are traded on
an exchange. ETFs have been available in the US since 1993 and in Europe since
1999. ETFs traditionally have been index funds, but in 2008 the U.S. Securities
and Exchange Commission began to authorize the creation of actively
managed ETFs.
The ability to purchase and redeem creation units gives ETFs
an arbitrage mechanism intended to minimize the potential deviation between the
market price and the net asset value of ETF shares. Existing ETFs have
transparent portfolios, so institutional investors will know exactly what portfolio
assets they must assemble if they wish to purchase a creation unit, and the
exchange disseminates the updated net asset value of the shares throughout the
trading day, typically at 15-second intervals.
If there is strong investor demand for an ETF, its share price will temporarily rise
above its net asset value per share, giving arbitrageurs an incentive to purchase
additional creation units from the ETF and sell the component ETF shares in the
open market. The additional supply of ETF shares reduces the market price per
share, generally eliminating the premium over net asset value. A similar process
applies when there is weak demand for an ETF: its shares trade at a discount from
net asset value.

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Types Of ETF
1. Equity Funds
Most ETFs track equity indexes or sectors. Some index ETFs mimic an index in its
entirety, and others use representative sampling, which deviates slightly by
using futures, option and swap contracts, and the purchase of stocks sometimes not
found in the index. If this sampling gets too aggressive, it can lead to tracking
errors. Any ETF with a tracking error above 2% is considered actively managed .
As ETFs become more and more specialized, this is something investors should
watch for.

2. Fixed-Income Funds
Most financial professionals recommend that you invest a portion of your portfolio
in fixed-income securities such as bonds and bond ETFs. This is because bonds
tend to reduce a portfolio's volatility, while also providing an additional stream of
income. The age-old question becomes one of percentages. What amount should
go to equities, fixed income and cash? This is commonly referred to as asset
allocation. As with equity funds, there are many bond funds available. Investors
who are unsure of what type to invest in should consider total bond-market ETFs,
which invest in the entire U.S. bond market.

3. Commodity Funds
Before investing in commodity ETFs, it's important to understand why you are
interested in commodities in the first place. Historically, commodities have had
little price correlation with equities. Experts suggest that strategic asset allocation
accounts for 90% of a portfolio's return. However, it's not enough to have stocks,
bonds, cash, commodities and real estate in your portfolio. You should also
diversify within each of those asset classes. That's where ETFs come in. Investors
can buy a commodity ETF that tracks the price changes of particular commodities
like gold or oil, or in a commodity stock ETF that invests in the common shares of
commodity producers. The former has little correlation with stocks, while the latter
is highly correlated. If your portfolio already contains equities, a straight
commodity ETF may make more sense.

4. Currency Funds
As the world's currencies become more volatile and the U.S. dollar's role as
a reserve currency slowly fades, investors wanting to protect the value of their
U.S.-denominated investments will seek options that provide a hedge against a
depreciating dollar. One option is to invest in foreign stocks or foreign stock ETFs.

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However, this won't provide you with asset class diversification because foreign
stocks are generally correlated with U.S. stocks. A better alternative is to invest in
foreign currency ETFs. Whether it's a single currency or one with a broader focus,
the intention here is to insulate your portfolio from a depreciating U.S. dollar. On
the other hand, if the U.S. dollar is appreciating and you own foreign stocks, you
can protect the value of those holdings by shorting the same currency ETF.

It's important to remember that currency investing should represent a small portion
of your overall investment strategy and is meant to soften the blow of currency
volatility.

5. Real Estate Funds

Income investors wanting a little sizzle with their steak might consider real estate
investment trust (REIT) ETFs. Whether you choose a fund that invests in a
specific type of real estate or one that is broader in nature, the biggest attraction of
these funds is the fact they must pay out 90% of their taxable
income to shareholders. This makes them extremely attractive in terms of yield,
despite the increased volatility compared to bonds. These funds are an excellent
source of income, especially when short-term interest rates and inflation are near
historic lows. (For more, see: How to Analyze Real Estate Investment Trusts.)

6. Specialty Funds
As ETFs became more popular, a variety of funds emerged to meet every
conceivable investment strategy, much like what happened with mutual funds.
Two of the more interesting are inverse funds, which profit when a particular index
does poorly, and leveraged funds, which can double or triple the returns of a
particular index by using leverage, as the name implies. You can even buy ETFs
that do both. If you choose to dabble in leveraged or inverse ETFs, it is important
that you understand the risks. In general, they are extremely volatile and unreliable
as long-term investments.

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Advantages of ETFs
a) Diversification
One ETF can give exposure to a group of equities, market segments, or styles. An
ETF can track a broader range of stocks, or even attempt to mimic the returns of a
country or a group of countries.

b) Trades Like a Stock

Although the ETF might give the holder the benefits of diversification, it has the
trading liquidity of equity. In particular:

 ETFs can be purchased on margin and sold short.

 ETFs trade at a price that is updated throughout the day. An open-ended
mutual fund, on the other hand, is priced at the end of the day at the net asset
value.
 ETFs also allow you to manage risk by trading futures and options just like a
stock.

Because ETFs trade like a stock, you can quickly look up the approximate daily
price change using its ticker symbol and compare it to its indexed sector or
commodity. Many stock websites also have better interfaces for manipulating
charts than commodity websites, and even provide applications for your mobile
devices.

c) Lower Fees

ETFs, which are passively managed, have much lower expense ratios compared to
actively managed funds, which mutual funds tend to be. What drives up a mutual
fund's expense ratio? Costs such as a management fee, shareholder accounting
expenses at the fund level, service fees like marketing, paying a board of directors,
and load fees for sale and distribution.

d) Immediately Reinvested Dividends

The dividends of the companies in an open-ended ETF are reinvested immediately,

whereas the exact timing for reinvestment can vary for index mutual funds. (One
exception: Dividends in unit investment trust ETFs are not automatically
reinvested, thus creating a dividend drag.

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 e) Limited Capital Gains Tax
ETFs can be more tax-efficient than mutual funds. As passively managed
portfolios, ETFs (and index funds) tend to realize fewer capital gains than actively
managed mutual funds. Also, when an ETF buys or sells shares, it's considered an
in-kind redemption and does not result in a tax charge.

Mutual funds, on the other hand, are required to distribute capital gains to
shareholders if the manager sells securities for a profit. This distribution amount is
made according to the proportion of the holders' investment and is taxable. If other
mutual fund holders sell before the date of record, the remaining holders divide up
the capital gain and thus pay taxes even if the fund overall went down in value.

f) Lower Discount or Premium in Price

There is a lower chance of ETF share prices being higher or lower than their actual
value. ETFs trade throughout the day at a price close to the price of the underlying
securities, so if the price is significantly higher or lower than the net asset value,
arbitrage will bring the price back in line. Unlike closed-end index funds, ETFs
trade based on supply and demand and market makers will capture price
discrepancy profits.

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Disadvantages of ETFs
While the pros are many, ETFs carry drawbacks too. Among them:

a) Less Diversification
For some sectors or foreign stocks, investors might be limited to large-cap stocks
due to a narrow group of equities in the market index. A lack of exposure to mid-
and small-cap companies could leave potential growth opportunities out of the
reach of ETF investors.

b) Intraday Pricing Might Be Overkill

Longer-term investors could have a time horizon of 10 to 15 years, so they may not
benefit from the intraday pricing changes. Some investors may trade more due to
these lagged swings in hourly price. A high swing over a couple hours could
induce a trade where pricing at the end of the day could keep irrational fears from
distorting an investment objective.

c) Costs Could Be Higher

Most people compare trading ETFs with trading other funds, but if you compare
ETFs to investing in a specific stock, then the costs are higher. The actual
commission paid to the broker might be the same, but there is no management fee
for a stock. Also, as more niche ETFs are created, they are more likely to follow a
low-volume index. This could result in a high bid/ask spread. You might find a
better price investing in the actual stocks.

d) Lower Dividend Yields

There are dividend-paying ETFs, but the yields may not be as high as owning a
high-yielding stock or group of stocks. The risks associated with owning ETFs are
usually lower, but if an investor can take on the risk, then the dividend yields of
stocks can be much higher. While you can pick the stock with the highest dividend
yield, ETFs track a broader market, so the overall yield will average out to be
lower.

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Performance of ETF’s in recent years
Passive funds emerged in USA more than two decades ago. The first modern day
exchange traded fund (ETF) S&P SPDR (Spiders) started trading in USA in in 1993.
The market for ETFs has grown tremendously since then. Today, there are 2,000
ETFs listed in US. Industry estimates suggest that ETFs manage $4 trillion globally.
India got its first ETF in the form of Nifty BeES in 2001 which was launched by
Benchmark AMC. It was probably way ahead of its time in India. Realizing the
category’s slow growth, Benchmark called it quits in 2011 by selling its schemes to
global giant Goldman Sachs Mutual Fund. Sensing a potential for passive funds,
Reliance Nippon Life lapped up Goldman Sachs schemes.
Benchmark AMC managed merely Rs 70 crore in ETFs in 2004. Today, the size of
the Indian ETF market has grown to Rs 65,124 crore. But if we compare the growth
of ETFs with actively managed equity funds, the growth has been tepid at best.
During the same period, the size of the actively managed equity funds has galloped
from Rs 29,362 crore in 2004 to Rs 8.55 lakh crore as on October 2017.
Let’s look at the reasons behind the slow growth of ETFs in India. The most
important factor for investors and advisers’ aversion to this category is the superior
performance of actively managed funds vis a vis passive funds. For instance, actively
managed large cap fund category has delivered 15% CAGR return over a five-year
period while BSE Sensex has grown by 12% during the same period.
Since ETFs passively track their underlying indices, they come with lower expenses
as compared to their active fund peers. ETFs which track the broader indices like
Sensex and Nifty charge 0.05%-0.10% annual total expense ratio (TER) whereas the
TER of actively managed funds can go up to as high as 3%. Due to their low-cost
nature, ETFs have no room to pay commissions on par with actively managed funds,
providing little incentive for distributors prefer to sell passive funds.
Paltry commission and performance are not the only reasons for slow take off of
passive funds. ETFs can be only bought through the exchange from demat accounts
and majority of MF investors in India have been investing physically through their
neighborhood distributors. Even those who possess demat accounts prefer to buy
shares or subscribe to IPOs rather than buying dull ETFs. This is in sharp contrast to
US where seven out of the 10 most actively traded securities on US stock markets
last year were ETFs, not shares, says a Financial Times report.

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Passive funds are seeing huge inflows in US as active fund managers have found it
increasingly difficult to beat the market due to an efficient and developed market.
We are witnessing similar trend in India in the large cap funds space. Over a 10-year
period, 45% of active funds have underperformed the Nifty 50. High costs/TER can
be one of the reasons for this underperformance. That said, fund managers believe
that there will be ample opportunities for outperformance especially, in the mid and
small cap space, which are not well researched.
The lackluster demand for ETFs in India has not stopped fund houses from launching
ETFs. Starting from Gold ETFs and equity ETFs, fund houses are innovating their
offerings by adding new flavor to their products. Today, we have ETFs to participate
in US indices and debt markets. Further, while traditional ETFs mimic their
underlying index based on market capitalization, the new age ETFs called smart beta
ETFs have emerged. These ETFs which combine both active and passive methods
of investing by looking at factors such as earnings, low volatility, return on equity,
dividend yield, etc. through custom build indices. While this looks like an interesting
innovation, investors should note that such ETFs may not be able to outdo active
funds as the underlying factors/theme may not outperform in all market cycles.
Active fund managers on the other hand can avoid such factors depending on market
conditions. One area where smart beta ETFs score over active funds is that they do
not come with key-person risk as they operate on fixed automated processes.
While the ETF market could take decades to flourish in India, fund houses are fully
prepared to cash in on this opportunity. The popularity of ETFs is growing due to
the government’s plans to divest its holdings in PSUs through this route. The first
divestment through CPSE ETF mopped up Rs 11,500 crore and the second version
in the form of Bharat 22 ETF is expected to mop up Rs 8,000 crore. Fund houses are
in intense race to get a mandate for managing such issues. Additionally, media
reports suggest that the Employees Provident Fund Organization’s (EPFO)
investment in ETFs is expected to touch Rs 45,000 crore by the end of this fiscal.
This massive flush of flow into ETFs suggest that the category will only grow from
here.

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Top performing ETF’s of the year
Performance of ETFs

Latest % Asset
Schemes NAV Returns in % (as on Mar 21, 2019)
Price Change Size

(Rs. cr.) (Rs./Unit) 1wk 1mth 3mth 6mth 1yr 2yr 3yr

SBI - ETF
Nifty Bank 301.33 0.19 1,242.39 300.73 3.3 10.7 9.3 13.4 23.8 18.5 24.0
Reliance ETF
Bank BeES 3,029.47 0.08 4,966.80 3,035.73 3.3 10.7 9.3 13.4 23.8 19.3 24.4
Edelweiss
ETS - 2,913.00 5.43 1.02 3,025.31 3.3 10.7 9.3 13.5 23.8 19.4 24.6
Banking
Kotak
Banking ETF 305.65 0.33 5,579.17 304.86 3.3 10.7 9.3 13.4 23.7 19.3 24.6
Kotak NV 20
ETF 58.84 0.75 5.42 58.04 1.3 5.6 6.6 3.6 22.8 19.8 18.3
Reliance ETF
NV20 583.81 0.31 18.11 580.91 1.3 5.6 6.5 3.5 22.7 19.6 18.2
ICICI
Prudential - 3.41 56.76 1.3 5.4 6.4 3.3 22.0 19.1 --
NV20 ETF
LIC MF ETF -
Sensex 382.00 -3.53 363.45 399.82 1.7 7.4 5.6 3.9 17.8 15.5 16.9
HDFC
Sensex ETF 4,009.95 -0.02 75.08 4,002.97 1.7 7.5 5.6 3.8 17.7 15.4 17.0
SBI - ETF
Sensex 402.42 0.06 10,000.00 403.49 1.7 7.5 5.6 3.8 17.7 16.4 17.5
Reliance ETF
Sensex 398.40 1.30 14.45 405.77 1.7 7.4 5.6 3.8 17.7 15.3 16.8
SIGN UP NOW!

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The case of ETF’s in three charts
ONE: ETF’s are not niche products

ETFs have been around for more than two decades, but they’ve really taken off in
the past five years or so. Today, investors of all types — from individuals to
sophisticated institutions — have helped increase ETF assets to more than $3.1
trillion globally. And while that’s still a fraction of the $21 trillion invested in
mutual funds, ETFs are growing at a faster pace, more than doubling in size over
the past five years.1

Part of the appeal of ETFs is their flexibility. Unlike mutual funds, which can only
be bought or sold once a day, at a price established at the market close, ETFs can
be traded whenever the market is open, just like stocks. Investors can also trade
them in the same way they do stocks, including selling short, or buying on margin,
and there is no minimum investment amount required. Learn more about the
differences between ETFs and mutual funds here.

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Two: Lower costs help you keep more of what you earn

An even bigger draw of ETFs is the bottom line—reducing costs. The fees for most
ETFs tend to be much lower than mutual funds, which means more money gets put
to work for you.

In fact, iShares Core ETFs average about one-tenth the net expense ratio of most
mutual funds.² The impact of these cost savings can be meaningful, particularly
over time or when market returns are sluggish.

Here’s another potential benefit. ETFs tend to be relatively tax efficient and incur
fewer undesirable capital gains distributions. So you can save up front, over time
and on your tax bill.

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Three: ETFs make it easy to get in—and stay in—the market

Ultimately, of course, pursuing your financial goals is about staying invested.

Timing market ups and downs is nearly impossible to get right, and missing out on
the rebounds can be costly. In the example here, missing just the five top-
performing days over the past 20 years would have cost more than $160,000;
missing the top 25 days would have nipped nearly 75% of potential gains.

So instead of trying to outsmart the market, it may make more sense to simply be
in the market, smartly.

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Data Analysis

The survey was conducted with 55 responses collected from different age groups
where the share was 41.8% in the age of 18-24, 29.1% in the age of 25-34 and
27.3% in the age of 35-44.

Out of 55 responses 54.5% were male and 45.5% were female.

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76.4% of the people are aware about the mutual funds and other investment plans
whereas remaining 23.6% do not invest at all.

55.6% of the people invests in mutual funds, 28.9% of the people invest in
Exchange Traded Funds and remaining 15.6% invest in others like fixed deposit
etc.

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As per the responses collected 45.8% are moderate risk taker, 33.3% are risk
averse who prefers lower returns with known risk rather than higher returns with
unknown risk and the lowest is 20.8% which are high risk taker.

As per the responses collected 37.5% of the people are Moderate in investment
habits and they continue to save. 12.5% are people with little savings whereas
14.6% are people who are starting out.16.7% people are significant in their
investment habits and have accumulated significant investment assets.

The longest term period to invest is more than 5 years according to the response it
was 33.3% and the lowest time period in which people invest in less than 1 year
which is 10.4% out of the total response received.

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People invest mostly according to the Web sites past performance of the fund
which is 25%. The equal weightage is given to two factors friends & relatives and
others. The lowest is Brand name which is 6.2%.

65.2% of the respondents feel that ETF is a strong alternative than large cap funds
and remaining 34.8% do not feel that ETF can take pla

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As per the responses collected 28.3% of the people invest 0 to 5% from their
income, 26.1% people invest 5 to 10% from their income, 21.7% invest 10 to 15%
from their disposable income, 13% of the people from their 15 to 20% of their
income and 10.9% of people invest above 20% from their income.

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FINDINGS
The aim of the study is to understand the mindset of people towards investment in
mutual funds or ETF’s. To analyse the performance of Exchange Traded Funds in
recent years and to know whether people are aware of ETF’s or not.

 The study found that people are involved in investing activities as 76.4% of
the respondents said that they invest.
 In India people have started investing in ETF’s as they are becoming more
aware. It also suggests that you can move in and out of markets quickly.
 In the age group of 18-25 it has been seen that people are not really aware
of ETF’s and are more comfortable in investing in mutual funds.
 An another observation made by study was people are moderate risk taker
and are less likely to take higher risk.
 People are moderate in their lifestyle and investments habits which implies
they save a little and aspire to do so.
 As per the survey conducted around 60% of respondents feel that ETF’s are
a strong alternative to large cap funds.
 People who earn 2.5 to 5 Lacs or above 10 Lacs invest 15 to 20% of their
disposable income which implies that people are willing to invest.

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Recommendations and Conclusions
 We know India is an emerging market they know/ how to save/invest in
order to secure future. There are many traditional ways of saving. They give
returns according to high and low risk. India is a young country having a
considerably big part of young people. They are more risk averse people.
They need a right direction for investment in the age group of 18-25. As per
the respondents people in the age group of 18-25 are not really aware of
ETF’s.
 Innovation has been the hallmark of the ETF industry since its beginnings
less than 25 years ago. Undoubtedly, there will be new and more unusual
ETFs introduced in the years to come. While innovation is a net positive for
investors, it’s important to realize that not all ETFs are created equal. You
should investigate carefully before investing in any ETF, carefully
considering all factors to ensure that the ETF you choose is the best vehicle
to achieve your investment goals.
 The heightened market volatility in 2018 took a toll on the performance of
large cap schemes as exchange-traded funds—which track an index, a
commodity, bonds, or a basket of assets—managed to beat “actively
managed funds” by providing superior returns to investors during the year.

 You need a demat and trading account to invest in ETFs in India. If you are
not comfortable with opening and maintaining these accounts, ETFs may not
be appropriate for you. You can also invest in passive indices through index
funds, rather than ETFs if you do not want to open demat and trading
accounts.

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Questionnaire
1. Email Address

--------------------------

2. Age

 18-24
 25-34
 35-44
 45-54
 55-64
 65+

3. Gender

 Male
 Female

4. Do you invest?

 Yes
 No

5. If Yes where?

 Mutual Funds
 ETF(Exchange Traded Funds)
 Others

6. What kind of investor are you ?

 Risk Averse
 Moderate Risk Taker
 High Risk Taker

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7. How would you describe your current lifestyle and investment habits?

 Significant- have accumulated significant investment assets

 Moderate-have saved a moderate amount and continuing to save
 Primarily Debt Payment -have increased my income, but i am primarily
paying down debt.
 Little Savings-have saved a little bit, but need to borrow frequently
 Starting Out

8. How long would you like to invest?

 Less than a year

 1-2 year
 2-3 years
 3-5 years
 More than 5 years

9. On what basis you invest?

 Friends and relatives

 Advertisements Company
 Brokers and agents
 Brand name
 Web sites Past performance of the fund
 Chartered Accountants
 Other

10.Do u think ETF's is a strong alternative to large cap funds?

 Yes
 No

11.What is your annual income approximately?

 0 to 2.5 Lacs
 2.5 to 5 Lacs
 5 to 7.5 Lacs
 7.5 to 10 Lacs
 Above 10 Lacs

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12.What percent of your disposable income do you keep aside for investment
options?

 0% to 5%
 5% to 10%
 10% to 15%
 15% to20%
 Above 20%

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 References
 www.investopedia.com
 A literature review and ETF’s future in India – Ravi Samalad
 https://economictimes.indiatimes.com/mf/analysis/why-index-funds-etfs-
are-better-than-large-cap-funds/articleshow/67138912.cms?from=mdr
 A review on investors perception on returns, risk and awareness of
mutual funds.
Prafulla Kumar Swain ,Professor, Institute of Business & Computer Studies (IBCS), Siksha'O'
Anusandhan University, Bhubaneswar, Odisha, India
 https://www.bnpparibasmf.in/learn-invest/understanding-risk-return

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