Introduction

Comparative analysis of products offered by ICICI Prudential Life Insurance Co.

Ltd, with products of ICICI Pru asset Management Company, the main aim of this
project was creates awareness about both the products offered by the same
company. The overall goal of this project was to create awareness about
investments. But the main reason to take up this project was to know that how
peoples are making their investment decision when they have so many investment
options are available. The Above problem arises because every investment products
having different positive and negative aspects.

Life Insurance is booming sector in today’s economy. So the responsibilities of the

insurance companies have been increased as compare to the past. Because in past
people were taking insurance policies for protection tool only. In present scenario
insurance sector is providing more services with the basic life insurance. ICICI
PRUDENTIAL LIFE INSURANCE COMPANY has number of products, which
gives the right way to save the money and earn good profit by invested premium.
Today people want more services and more return on their investment. So this
insurance company is providing more value – added services with the basic
insurance operation.

The project was taken to know about, what that point is in any Insurance company
that is unique selling point (USP) which gives it highest business and customer
always like to invest with this company which gives the company a position of a
leader in market.

By doing this type of study I came to know that in the Insurance sector there is a
vast scope and opportunity in this booming field of Life Insurance. The growing
awareness among the public regarding insuring their life through Life insurance
policies as well as the growing contribution of Insurance in GDP of country with
the number of private players making entrance in this booming industry of
Insurance.

A Mutual Fund is a trust that pools the savings of a number of investors who share
a common financial goal. The money thus collected is then invested in capital
market instruments such as shares, debentures and other securities. The income
earned through these investments and the capital appreciations realized are shared
by its unit holders in proportion to the number of units owned by them. Thus a
Mutual Fund is the most suitable investment for the common man as it offers an
opportunity to invest in a diversified, professionally managed basket of securities at
a relatively low cost. It is the cost effective way to invest the money in financial
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markets .mutual funds are providing good returns to their customer very good
returns. But in this tool of investment the risk is more compare to traditional
investment products like bank FD GOVT BONDS Etc. so many people are not
willing to take this type of risk by investing in mutual fund.

A mutual fund is just the connecting bridge or a financial intermediary that allows
a group of investors to pool their money together with a predetermined investment
objective. The mutual fund will have a fund manager who is responsible for
investing the gathered money into specific securities (stocks or bonds). When you
invest in a mutual fund, you are buying units or portions of the mutual fund and
thus on investing becomes a shareholder or unit holder of the fund.

Mutual funds are considered as one of the best available investments as compare to
others they are very cost efficient and also easy to invest in, thus by pooling money
together in a mutual fund, investors can purchase stocks or bonds with much lower
trading costs than if they tried to do it on their own. But the biggest advantage to
mutual funds is diversification, by minimizing risk & maximizing returns.

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OBJECTIVES
.To Compare Investment Options available in Ranchi

.To finds out the preference for ICICI Life Insurance ULIP Plans with Different
Mutual fund plans offered by ICICI PRUDENTIAL

.To finds out the USP of ICICI life insurance products and mutual fund
in market.

· To suggest a strategy to ICICI PRUDENTIAL LIFE INSURANCECOMPANY for

creating awareness about ULIP and getting an competitive advantage

.TO suggest strategy to ICICI ASSET MANAGEMENT COMPANY for creating

awareness about mutual fund so that they can gain competitive advantage on other
investment tools

Limitations
. The middle class people do not know basic concept of ULIP and mutual funds so
creating awareness is a big challenge for me.

.The findings of sample survey cannot be generalized to the entire population, as

the sample is not representative. As there is no set criterion for selecting the
sample, there is a scope for the research being influenced by the bias of the
researcher.

.Narrow minded thinking of middle class people as investment is not their cup of
tea.
.Many customers are thinking that investment in share market is very risky.
Because ULIP and mutual funds are linked with the share market.

.A general preference to LIC and UTI over private players like ICICI, HDFC

.Hesitations on the part of respondents to disclose financial information

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2. Research design/Methodology

Research design can be defined as the plan and structure of enquiry formulated in
order to obtain answers to research questions on business on business aspects.
Research design can be understood as that which gives the blueprint for collection,
measurement and analysis of business data. The research plan constitutes the
overall program of the business research process. The planning process includes
the framework of the entire research process, starting from developing hypothesis
to the final evaluation of collected data. Research design is essential because it
facilitates the smooth flow of various research results can be obtained with
minimum utilization of time, money and effort. Therefore it can be said that design
is highly essential for planning research activities. If research design is not
properly prepared, it will jeopardize the whole research process and will not meet
its purpose.

Exploratory Studies
Exploratory research is carried out to make problem suited to more precise
investigation or to frame a working hypothesis from an operational perspective.
Exploratory studies help in understanding and assessing the critical issues of
problems. It is not used in case where a definite result is desired. However, the
study results are used for subsequent research to attain conclusive results for a
particular problem situation. Exploratory studies are conducted for three main
reasons, to analyze a problem situation, to evaluate alternatives and to discover
new ideas.

Research hypothesis

If a hypothesized relationship or prediction has to be tested by scientific methods,

it is called research hypothesis. A research hypothesis is one that links an
independent variable to a dependent variable. It should generally contain one
dependent and one independent variable.

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Method of Data collection

Data can be collected in different ways from the subject of study. One method is to
observe subjects on certain parameters, which is called observation studies. In such
studies, the subjects (respondents) by asking them questions through a
questionnaire. Here the researcher can adopt either method based on the study
that needs to be conducted. For instance, if research has to be done on the traffic
Flow at a particular junction, then the observation method is best. On the other
hand, if consumer preferences about a new product are to be estimated, then a
questionnaire for obtaining consumer responses is the best method.

Research Design has been classified into four subsections they are:

1. Sample selection and size;

2. Sampling procedure;

3. Data collection; and

4. Analytical tools

Sample Selection and size

The first step of research is sample selection, for which the respondents were
investors in Ranchi. The total consumers covered were 100. The same numbers of
questionnaires were distributed, but only 70 fully-completed questionnaires were
received. Results are based on the response of these 70 respondents.

Sampling procedure

The consumers are selected by the convenience sampling method. The selection
of units from the population based on their easy availability and accessibility to the
researcher is known as convenience sampling. Convenience sampling can be used
as a part of a preliminary research that forms a basis for conducting the detailed
research. Convenience sampling is at its best in surveys dealing with an
Exploratory purpose for generating ideas and hypothesis.

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Steps in Sampling Procedure

· Defining the target population

· Specifying the sampling frame

· Specifying the sampling Unit

· Selection of the sampling method

· Determination of sample size

· Specifying the sampling plan

· Selecting the sample

Data Collection method

For the present study, the survey method was used for collecting primary data. A
structured questionnaire was used for the purpose. The questionnaire included
multiple choice questions. The main source of secondary data has been IRDA
JOURNALS, OUTLOOK MONEY, COMPANY WEBSITE AND
INTERNET.
The study employs primary data collected by communicating with the respondents
with the help of structured questionnaire. Before undertaking the survey, pilot test
of the questionnaire was done with 15 respondents. Their views were incorporated
in the final questionnaire. The Hindi version of the questionnaire was also used
in the survey to include responses of investors, who are not comfortable with the
English language, as the research area is Ranchi. The study mainly deals with the
financial behavior of individual investors towards mutual funds and ULIP in
Ranchi.

Analytical Data

The data thus collected, was tabulated, interpreted and analyzed with a view to
make the study meaningful. In the present study, hypothesis testing, percentage,
frequency and cross tabulation methods have been used for analysis.

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Review of the literature
U Jawaharlal and Nikhil Pareek analyzed ‘the customer service in Life Insurance’
In Insurance Chronicle (April 2004) he had analyzed the different services of Life
Insurance players in India.

Narayan Krishnamurthy in Outlook money (Sep 15, 2003) article analyzed the
situational need of Insurance at different situations and steps of life in his article
‘AT every step of Life…’

Navasiyam et al. (2006) analyzed the socioeconomic factors that are responsible
for taking life insurance policies and examined the preferences of the policyholders
towards various types of policies of LIC. From the analysis, it was found that
factors such as age, educational level and sex of the policyholders are insignificant.
However, income level, occupation and family size are significant while deciding
on an insurance policy. From the analysis, it is inferred that respondents belonging
to the age group of 31 to 40 years are much interested in taking a life insurance
policy.

MFs have attracted a lot of attention and kindled the interest of both academic and
practitioner communities. Compared to the developed markets, very few studies on
MFs are done in India. This literature review reveals investor behavior studies. The
research on mutual funds has been extremely skewed in terms of geographical
coverage, most focused to developed countries like US.

Tamal Datta chaudhuri, Jayanta Kumar seal, edited the book named ‘Mutual Funds
Industry’ it includes empirical study made by Navdeep agrwal and Mohit Gupta
titled ‘performance of mutual fund in India: an empirical study’.

Mary Rowland written ‘The New Common sense Guide to mutual funds’ it
includes the guidelines while investing in mutual fund. How should one invest in
mutual fund and when what step should be taken in a situation by a investor.
Gupta LC (1993) conducted a household investor survey with the objective to
provide data on investor preferences on MFs and other financial asset.

Raja Rajan (1997-1998) high lightened segmentation of investors on the basis of

their characteristics, investment size, and the relationship between stage in life
cycle of the investors and their investment pattern.

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 INDUSTRY PROFILE:

Life Insurance players in Ranchi providing ULIPS

1. Max New York Life Insurance Company Ltd

2. ICICI Prudential Life Insurance Company Ltd.
3. Bajaj Allianz Life Insurance Company Ltd.
4. HDFC Life Insurance Company Ltd.
5. Reliance Life Insurance Company Ltd.
6. SBI Life Insurance Ltd.
7. Aviva Life Insurance Company Ltd.
8. MetLife insurance company
9. Bharti Axa life insurance Company
10 Life insurance Corporation

COMPANY PROFILE:
Contact Information

ICICI Prudential Life Insurance Company Limited

Registered Office

ICICI Towers 
9th floor, Bandra-Kurla Complex
Mumbai - 400 051. 
Tel: 494 3232

Delhi office:

3rd floor 
Videocon Towers
E-1, Rani Jhansi Road 
New Delhi - 110055. 
Tel: 601 3232 
Email: wecoveru@icici.com
Visit us on: www.iciciprulife.com

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ICICI PRUDENTIAL LIFE INSURANCE COMPANY

ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank -
one of India's foremost financial services companies-and prudential plc - a leading
international financial services group headquartered in the United Kingdom. Total
capital infusion stands at Rs. 47.80 billion, with ICICI Bank holding a stake of
74% and Prudential plc holding 26%.
Company began its operations in December 2000 after receiving approval from
Insurance Regulatory Development Authority (IRDA). Today, companies nation-
wide reach includes over 1,900 branches (inclusive of 1,074 micro-offices), over
210,000 advisors; and 7 banc assurance partners.
 For three years in a row, ICICI Prudential has been voted as India's Most Trusted
Private Life Insurer, by The Economic Times - AC Nielsen ORG Marg survey of
'Most Trusted Brands'. As company grows his distribution, product range and
customer base, Pru life continue to tirelessly uphold its commitment to deliver
world-class financial solutions to customers all over India.

VISION

To be the dominant Life, Health and Pensions player built on trust by world-class
people and service. This we hope to achieve by:

 Understanding the needs of customers and offering them superior products

and service
 Leveraging technology to service customers quickly, efficiently and
conveniently
 Developing and implementing superior risk management and investment
strategies to offer sustainable and stable returns to our policyholders
 Providing an enabling environment to foster growth and learning for our
employees 
 And above all, building transparency in all our dealings

The success of the company will be founded in its unflinching commitment to 5

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core values -- Integrity, Customer First, Boundary less, Ownership and Passion.
Each of the values describes what the company stands for, the qualities of our
people and the way we work.
 We do believe that we are on the threshold of an exciting new opportunity, where
we can play a significant role in redefining and reshaping the sector. Given the
quality of our parentage and the commitment of our team, there are no limits to
our growth.

VALUES
 
Every member of the ICICI Prudential team is committed to 5 core values:
Integrity, Customer First, Boundary less, Ownership, and Passion. These values
shine forth in all we do, and have become the keystones of our success.

PROMOTORS

ICICI Bank

ICICI Bank Limited (NYSE:IBN) About ICICI Bank: ICICI Bank Ltd

(NYSE:IBN) is India's largest private sector bank and the second largest bank in
the country with consolidated total assets of over US$ 100 billion as of March 31,
2010. ICICI Bank’s subsidiaries include India’s leading private sector insurance
companies and among its largest securities brokerage firms, mutual funds and
private equity firms. ICICI Bank’s presence currently spans 19 countries,
including India.
Prudential Plc

Established in London in 1848, Prudential plc is an international retail financial

services group with significant operations in Asia, the US and the UK serving
around 25 million customers, policyholder and unit holders worldwide. The
company has £290 billion of assets under management and it is one of the best
capitalized insurers in the world with an Insurance Groups Directive (IGD)
capital surplus estimated at £3.4 billion (at 31 December 2009). Prudential is a
leading life insurer in Asia with a presence in 12 markets and have the top three
positions in seven key locations of Hong Kong, India, Indonesia, Malaysia,
Singapore, the Philippines and Vietnam.

BOARD OF DIRECTORS
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The ICICI Prudential Life Insurance Company Limited Board comprises reputed
people from the finance industry both from India and abroad. 
 

Ms. Chanda D Kochher Chairperson

Mr. N. S. Kennan  Director

Mr. K. Ramkumar   Director

Mr. Rajiv Sabharwal  Director

Mr. Barry Stowe Director

Mr. Adrian O’Connor  Director

Mr. Keki Dadiseth Independent Director

Prof. Marti G. Subrahmanyam  Independent Director

Ms. Rama Bijapurkar  Independent Director

Mr. Vinod Kumar Dhall Independent Director

Mr. Sridar Iyengar  Independent Director

Mr. Sandeep Bakhshi   Managing Director & CEO

Mr. Puneet Nanda  Executive Director

Mr. Madhivanan Balakrishnan  Executive Director

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PRODUCTS:- ULIP
ULIPs are a category of goal-based financial solutions that combine the safety of
insurance protection with wealth creation opportunities. In ULIPs, a part of the
investment goes towards providing you life cover. The residual portion is
invested in a fund which in turn invests in stocks or bonds. The value of
investments alters with the performance of the underlying fund opted by you.

Simply put, ULIPs are structured such that the protection element and the savings
element can be distinguished and hence managed according to your specific
needs, offering unprecedented flexibility and transparency. It is critical that you
understand how your money gets invested once you purchase ULIP.

Once you decide the amount of premium to be paid and the amount of life cover you
want, the insurer deducts some portion of the premium upfront. This portion is
known as the Premium Allocation charge and this varies from product to product.
The rest of the premium is invested in the fund or mixture of funds chosen by you.
Mortality charges and administration charges are thereafter deducted on a periodic
(mostly monthly) basis whereas the fund management charges are deducted on a
daily basis

Premium break-up (ILLUSTRATION – 1)

Since the fund of your choice has an underlying investment – either in equity or debt
or a combination of the two – your fund value will reflect the performance of the
underlying asset classes. At the time of maturity of your plan, you are entitled to
receive the fund value as at the time of maturity. The pie-chart below illustrates the

12 | P a g e
split of your ULIP premium in a graphical format.
In addition to the investment fund ULIPs give you the benefit of insurance cover as
well. The mortality charge mentioned above goes towards provision of this cover.

Over a period of time, the component of charges as a percentage of the premium

paid tends to decrease. Which is why, you should continue paying your premiums
regularly. That is the best way of making your ULIP deliver on its dual benefit of
protection and wealth creation.

One of the big advantages that a ULIP offers is that whatever be your specific
financial objective, chances are that there is a ULIP which is just right for you.
The figure below gives a general guide to the different goals that people have at
various age-groups and thus, various life-stages.

LIFE STAGES AND GOAL (ILLUSTRATION- 2)

Depending on your specific life-stage and the corresponding goal, there is a ULIP
13 | P a g e
which can help you plan for it.

ULIP FOR LONG TERM WEALTH CREATION

ULIPs are the right insurance solutions for you if you are looking for a strong
wealth creation proposition allied to a core insurance benefit. Such plans are ideal
for people who are in their late 20s and early 30s and by investing in such a plan
get the flexibility of using it to fund any of their long-term financial goals such as
purchase of a house or funding their children’s education. The added element of
life cover serves to make these plans a wholesome financial investment option.

Wealth Creation ULIPs can be primarily classified as

Single premium - Regular premium plan :
Depending upon you needs & premium paying capacity you can either opt for a
single premium plan where you need to pay premium only once during the term
of entire policy or regular premium plans where you can premium at a frequency
chosen by you depending upon your convenience

Guarantee plans – Non guarantee plans:

Today there is wealth creation ULIPS which also offer guaranteed benefit. These
plans are ideal insurance-cum-investment option for customers who want to
enjoy the potentially higher returns (over the long term) of a market linked
instrument, but without taking any market risk. On the other hand non guarantee
plans comes with an in - built range of fund options to choose from –ranging
from aggressive funds (Primarily invested in equities with the general aim of
capital appreciation) to conservative funds (invested in cash, bank deposits and
money market instruments with aim of capital preservation) so that you can
decide to invest your money in line with your market outlook, time horizon and
your investment preferences and needs.

Life Stage based – Non life Stage based:

Life Stage based Ulip factor in the fact that your priorities differ at different life
stages & hence distribute your money across equity & debt. Here the initial
allocation is decided as per your age since age is a significant indicator of risk
appetite. Such a strategy ensures that the asset allocation at all times is in sync
with your age and changing financial needs.

14 | P a g e
Today there are ULIPs that offer money at key milestones of your child's
education thus ensuring that your child’s education continues unhampered even if
something unfortunate happens to you. While, the death of a parent is an
irreparable emotional loss, child education plans safeguard the child against the
financial ramifications of the death of a parent.

Apart
One offrom aboveimportant
the most mentioned benefit, child you
responsibilities planshave
alsoasoffers below
a parent mentioned
is to ensure that
features.
your child gets the best possible education that can be provided. Apart from
conventional schooling, it becomes important to expose your child to different
activities such as dance, painting and sports training for holistic development. As
a parent, you want to ensure that their development is not hampered either due to
rising costs or unforeseen circumstances.
 
Flexibility of adding on various riders like Income benefit rider, disability
rider etc to get additional benefits .For e.g. In case of income benefit rider, In
the event of the death of the parent, the child will receive a regular pre-
 
determined amount every year to meet the educational expenses.

In case of unfortunate incidence of the death of a parent, not only will the
child receive the sum assured immediately but will also continue to receive
 
money at the key educational milestones.
 

When you are young and working you save for various goals like marriage,
education, retirement etc. but saving for health care is never considered or left for
later. During these years we have various sources of income or savings on which
we can rely for health emergencies
But with increasing cost of healthcare, proportion of this spend is increasing at an
alarming pace. This is forcing families to borrow or sell assets to meet expenses
during medical emergencies. And during old age health care expenses increase
due to health deterioration because of age and higher incidence of chronic illness.
Thus it is important for you to invest in health insurance today so that tomorrow
you are fully prepared to meet rising healthcare expenses, which would be
incurred during old age, with the right health insurance plan.

Health ULIP is a recent innovation from the health insurance industry. In a health
ULIP part of your premiums are allocated for investment designed specifically to
build a health fund to meet future health related expenses. It aims to create a
health savings kitty by investing in a long term flexible savings plan with
multiple fund options. The health fund thus created allows you to claim for health
15 | P a g e
related expenses of any kind and also fund your future health insurance charges.
You can also avail of tax benefit on premium paid u/s 80D.

PRODUCTS( TABLE -1)

 
Plan Name  Plan Type
 
   
ICICI Pru Life Stage Wealth II  ULIP
   
   
ICICI Pru Pinnacle II  ULIP
   
   
ICICI Pru Lifetime Premier ULIP
   
   
ICICI Pru Life Link Wealth SP  ULIP
   
 

ICICI Prudential life stage wealth II

Premium Minimum annual

Minimum Premium payment option premium(Rs.)
Regular pay Rs. 24,000
Limited pay -5 Rs. 48,000
Limited pay -7 Rs. 36,000
Limited pay -10 Rs. 24,000
Rs. 1,00,000 per annum for all premium
Maximum Premium
payment option
Modes of premium payment Yearly / Half Yearly / Monthly
Policy Term 10, 15, 20, 25 or 30 years
Minimum/Maximum age at entry 7 / 65 years
Minimum/Maximum age at
18 / 75 years
maturity
Minimum Sum Assured for age at
Higher of (10 × annual premium) and (0.5 ×
entry below 45 years
Policy Term × annual premium)
Higher of (7 ×  annual premium) and (0.25 ×
Minimum Sum Assured for age at
Policy Term × annual premium)
entry 45 years and above
Maximum Sum Assured As per maximum sum assured multiples

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 Features and benefits
 Multiple portfolio strategies: Choose a personalized portfolio strategy
from

Fixed Portfolio Strategy: Option to allocate your savings in the funds of
your choice:-

Lifecycle based Portfolio Strategy: A unique and personalized strategy to
create an ideal balance between equity and debt, based on your age

 Trigger Portfolio Strategy: A unique portfolio strategy to protect gains

made in equity markets from any future equity market volatility while
maintaining a pre-defined asset allocation

 Flexible premium payment options: You can either pay premium
throughout the policy term or for a limited period

 Top up: Flexibility to invest surplus money over and above your regular
premiums

 Loyalty Additions: Paid at the end of every policy year, starting from the
10th policy year, on payment of all due premiums

 Automatic Transfer Strategy: Helps you eliminate the need to time your
investment

ICICI PRU PINNACLE STAGE II ( TABLE -2)

Premium Payment Term 5 years

Minimum Premium
Maximum Premium
Modes of Premium payment
Policy Term
Maximum Maturity Age
Minimum Sum Assured
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Rs. 50,000 p.a.
Rs. 2,00,000 p.a.
Yearly
10 years (fixed)
75 years
Age at entry Minimum SA
<45 yrs 10 * Annual Premium
>=45 yrs 7   * Annual Premium
 

Benefits of Pinnacle stage II

1. Guaranteed NAV: Get the benefit of the highest NAV recorded on a daily
basis, in the first 7 years of the Pinnacle II Fund, at maturity.
In this product, we guarantee the highest Net Asset Value (NAV) recorded on a
daily basis, in the first 7 years of launch of the Pinnacle II Fund, subject to a
minimum of Rs.10. The guarantee will be applicable only at maturity. The period
of 7 years starts from the date of launch of Pinnacle II Fund and will end on the
completion of 7 years (from 26/10/2010 to 26/10/2017).
 
2. Limited premium payment term:  Pay premiums for only five policy years.
 
3. Death benefit: In the unfortunate event of death of the Life Assured, the
nominee will receive Sum Assured plus Fund Value, subject to Minimum Death
Benefit.
 
4. Partial withdrawals: Ensures liquidity from the 6th policy year onwards.
 
5. Tax benefits: Avail tax benefits on the premiums paid and benefits received
under the policy, as per the prevailing Income Tax laws
 
6. Loyalty Additions: Added to the fund at maturity. Calculation of the fund
value for Loyalty Addition will be based on the prevailing NAV and not on the
Guaranteed NAV

ICICI PRU Lifetime premier (TABLE-3)

Limited Pay
Regular Pay
Rs. 50,000 per
Minimum Premium Rs. 18,000 per annum
annum
10, 15, 20, 25 or 30
Policy Term 10 years
years
Premium payment
Regular pay 5 years
term
Minimum Sum
Higher of (10 × annual premium) and (0.5 ×
Assured for age at
Policy Term × annual premium)
entry below 45 years
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 Minimum Sum
Assured for age at  Higher of (7 ×  annual premium) and (0.25
entry 45 years and × Policy Term × annual premium)
above
Maximum Sum
As per maximum Sum Assured multiples
Assured
Minimum/ Maximum
7 / 65 years
age at entry
Minimum/ Maximum
 18 / 75 years
age at maturity
Modes of Premium
Yearly
Payment
Premium and any benefit amount received
Tax Benefits under this policy will be eligible for tax
benefit as per prevailing Income Tax laws
 
FEATURES
Trigger Portfolio Strategy: Option to choose a unique portfolio strategy to
protect gains made in equity markets from any future equity market volatility
while maintaining a pre-defined asset allocation
 
Flexible premium payment options: You can either pay premium throughout
the policy term or for a limited period
 
Loyalty Additions: Paid at the end of every five policy years, starting from the
10th policy year, irrespective of the premium payment status
 
Top up: Flexibility to invest surplus money over and above your regular
premiums
 
Automatic Transfer Strategy: Helps you eliminate the need to time your
investment

LIFE LINK WEALTH SP (TABLE-4)

Minimum
Rs. 40,000
Premium
Min/Max age
0 - 60 years
at entry

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 Min/Max
8 - 70 years
maturity age
Sum Assured Choice of 125% or 500% of single premium
Policy term 10 / 20 / 30 years
Premium and any benefit amount received will be
Tax benefit eligible for tax benefit as per the prevailing Income
Tax laws
FEATURES

1. Single premium ULIP: Pay premiums only once and stay invested for a
long term
2. Trigger Portfolio Strategy: A unique portfolio strategy to protect gains
made in equity markets from any future equity market volatility while
maintaining a pre-defined asset allocation
3. Loyalty Addition: Up to 2.5% of Fund Value, at the end of every fifth
policy year, starting from the tenth policy year
4. Two options of Sum Assured: Choose between 125% or 500% of premium
as the Sum Assured to suit your protection needs
5. Top up: Flexibility to invest surplus money to boost your investment kitt
6. Tax benefits: On the premium paid and benefits received under the policy,
as per the prevailing Income Tax laws

MUTUAL FUNDS INDUSTRY PROFILE

History of mutual funds

The mutual fund industry in India started in 1963 with the formation of Unit Trust
20 | P a g e
of India, at the initiative of the Government of India and Reserve Bank the. The
history of mutual funds in India can be broadly divided into four distinct phases.

First Phase – 1964-87: Unit Trust of India (UTI) was established on 1963 by an
Act of Parliament. It was set up by the Reserve Bank of India and functioned under
the Regulatory and administrative control of the Reserve Bank of India. In 1978
UTI was de-linked from the RBI and the Industrial Development Bank of India
(IDBI) took over the regulatory and administrative control in place of RBI. The
first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had
Rs.6, 700 crores of assets under management.

Second Phase – 1987-1993 (Entry of Public Sector Funds): 1987 marked the entry
of non- UTI, public sector mutual funds set up by public sector banks and Life
Insurance Corporation of India (LIC) and General Insurance Corporation of India
(GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June
1987 followed by Can bank Mutual Fund (Dec 87), Punjab National Bank Mutual
Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank
of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989
while GIC had set up its mutual fund in December 1990. At the end of 1993, the
mutual fund industry had assets under management of Rs.47, 004 crores.

Third Phase – 1993-2003 (Entry of Private Sector Funds): With the entry of private
sector funds in 1993, a new era started in the Indian mutual fund industry, giving
the Indian investors a wider choice of fund families. Also, 1993 was the year in
which the first Mutual Fund Regulations came into being, under which all mutual
funds, except UTI were to be registered and governed. The erstwhile Kothari
Pioneer (now merged with Franklin Templeton) was the first private sector mutual
fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were
substituted by a more comprehensive and revised Mutual Fund Regulations in
1996. The industry now functions under the SEBI (Mutual Fund) Regulations
1996.

The number of mutual fund houses went on increasing, with many foreign mutual
funds setting up funds in India and also the industry has witnessed several mergers

21 | P a g e
and acquisitions. As at the end of January 2003, there were 33 mutual funds with
total assets of Rs. 1, 21,805 crores. The Unit Trust of India with Rs.44, 541 crores
of assets under management was way ahead of other mutual funds.

Fourth Phase – since February 2003: In February 2003, following the repeal of the
Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is
the Specified Undertaking of the Unit Trust of India with assets under management
of Rs.29, 835 crores as at the end of January 2003, representing broadly, the assets
of US 64 scheme, assured return and certain other schemes. The Specified
Undertaking of Unit Trust of India, functioning under an administrator and under
the rules framed by Government of India and does not come under the purview of
the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It
is registered with SEBI and functions under the Mutual Fund Regulations. With
the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000
crores of assets under management and with the setting up of a UTI Mutual Fund,
conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking
place among different private sector funds, the mutual fund industry has entered its
current phase of consolidation and growth. As at the end of September, 2004, there
were 29 funds, which manage assets of Rs.153108 crores under 421 schemes. 

4.4 Different mutual fund companies Available in Ranchi

1) UTI mutual fund.
2) SBI Mutual fund.
3) Reliance Mutual fund.
4) ICICI Prudential Mutual Fund.
5) Kotak Mutual Fund.
6) Birla Sun Life Mutual Fund
8) HDFC Mutual Fund
9) ING Vysya Mutual Fund
10) Prudential ICICI Mutual Fund
11) Sahara Mutual Fund
12) Standard Chartered Mutual Fund
13) Franklin Templeton India Mutual Fund
14) LIC Mutual Fund

WORKING OF MUTUAL FUND (ILLUSTRATION -3)

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 Regulatory Authorities
To protect the interest of the investors, SEBI formulates policies and regulates
the mutual funds. It notified regulations in 1993 (fully revised in 1996) and
issues guidelines from time to time. MF either promoted by public or by private
sector entities including one promoted by foreign entities is governed by these
Regulations. SEBI approved Asset Management Company (AMC) manages the
funds by making investments in various types of securities. Custodian,
registered with SEBI, holds the securities of various schemes of the fund in its
custody. According to SEBI Regulations, two thirds of the directors of Trustee
Company or board of trustees must be independent.
The Association of Mutual Funds in India (AMFI) reassures the investors in
units of mutual funds that the mutual funds function within the strict regulatory
framework. Its objective is to increase public awareness of the mutual fund
industry.AMFI also is engaged in upgrading professional standards and in
promoting best industry practices in diverse areas such as valuation, disclosure,
transparency etc.

Company profile

ICICI Prudential Asset Management Company Limited is a privately owned

investment manager. The firm provides its services to individuals and institutions.
23 | P a g e
It manages separate client-focused equity, fixed income, and balanced mutual
funds. The firm invests in the public equity and fixed income markets of India. It
operates as a subsidiary of ICICI Bank Ltd. ICICI Prudential Asset Management
Company Limited was founded in 1998 and is based in Mumbai, India.
3rd Floor,
Hallmark Business Plaza,
Sant Dyaneshwar Marg,
Bandra (East)
Mumbai, 400051
India
Founded in 1998
Phone:
91 22 2642 8000
Fax:
91 22 2655 4165
www.icicipruamc.com/

Mr. Nimesh Shah

Chief Executive Officer

Mr. B. Ramakrishna

Chief Financial Officer

Mr. Hemant Kumar Agarwal

Head of Operations

Mr. Nilesh Shah

Deputy Managing Director and Director

Mr. Sankaran Naren

Chief Investment Officer of Equities and Portfolio Manager

PRODUCTS OFFERED BY ICICI MUTUAL FUND COMPANY

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· Open ended schemes

· Close ended schemes

· Growth/Equity oriented Schemes

· Income/Debt oriented Schemes

· Balanced Funds

· Money market or liquid funds

· Gilt Funds

· Index Funds

· Exchange Traded Funds

· Sect oral Funds

· Thematic Funds

· Commodity Funds

· Real Estate Funds

· Tax Saving Funds

· Hybrid Funds

There are several ways for investment and disinvestments in mutual funds such as:

· Systematic Investment Plans (SIPs)

· Value Averaging

· Systematic Transfer Plans (STPs)

· Systematic Withdrawal Plans (SWPs)

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· Automatic Reinvestment Plans.

Open ended fund

In an open-ended fund, sale and repurchase of units happen on a continuous basis,

at NAV related prices, from the fund itself. The corpus of open-ended funds,
therefore, changes every day.

Close ended fund

A closed-end fund offers units for sale only in the NFO. It is then listed in the
market. Investors wanting to buy or sell the units have to do so in the stock
markets. Usually closed-end funds sell at a discount to NAV.The corpus of a
closed-end fund remains unchanged.

Growth fund

Provide capital appreciation over the medium to long-term

• Investor who does not require periodic income distribution can choose the option,
where the incomes earned are retained in the investment portfolio and allowed to
grow, rather than being distributed to investors.

• Investors with longer investment horizons and limited requirements for income
choose this option.

• The return to the investor who chooses a growth option is the rate at which his
initial investment has grown over a period for which he has invested in the fund.

• The investor choosing this option will vary the NAV with the value of the
investments portfolio, while the no. of units held with remains constant.

Income fund
.Provide regular and steady income to investor
·Balanced fund
Provide both growth and regular income

·Money market fund

Provide easy liquidity, regular income and preserve the income

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·Tax saving scheme
Offer tax rebates to the under specific provisions of the Indian income tax laws
Investments made under some schemes are allowed as deduction U/S 88 of the
income tax act.

· Automatic Reinvestment Plans

Reinvestment of amount of dividend made by fund in the same fund. In this option,
the no. of units held by the investor will change with every reinvestment. The
value of units will be similar to that under the dividend option There are four types
of plans as follows.

· Lump sum Investment

It is one time investment. Investors can invest particular amount one time for fixed
time of period.

· Systematic Investment Plans (SIP) – For regular investment

SIP is investing a fixed sum periodically in a disciplined manner for long term.
It gives benefit of Rupee Cost averaging. In SIP monthly minimum Rs.500 or
Rs.100 are invested. Interest is calculating compoundly. Many SIPs gives
insurance benefits.
VAP is modified version of SIP. It is Voluntary Accumulation Plan. It allows the
investor flexibility with respect to the amount and frequency of investment.
In VAP, investor has to impose voluntary self discipline.

· Systematic Withdrawal Plan (SWP) – For regular income

The lump sum amount is invested for one time and then fixed percent amount is
withdrawn monthly. Remaining amount will grow continuously. This plan is
suitable for retired person, because it gives regular income.

· Systematic Transfer Plan (STP) –

Transfer on a periodic basis a specified amount from one scheme to another within
the same fund family. It gives option to the investor if the current fund
performance in not satisfactory.

· Dividend option

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 · Investors will receive dividends from the mutual fund, as and when dividends are
declared.

· Dividends are paid in the form of warrants or are directly credited to the
investor’s bank accounts.

· In normal dividend plan, periodicity of dividends is left to the fund managers; the
timing of the dividend payout is decided by fund manager.

· Mutual funds provide the option of receiving dividends at pre-determined

frequencies, which can vary from daily, weekly, monthly, quarterly, half-yearly
and annual. Investors can choose the frequency of dividend distribution that suits
their requirements.

· Investors choosing this option have a fixed no. of units invested in the fund and
earned incomes on this investment.

· The NAV of this investors holding will vary with changes in the value of
portfolio and the impact of the proportion of income earned by the fund to what is
actually distributed as dividend.

FUNDS OFFERED BY ICICI –PRU MUTUAL FUND

 ICICI Prudential Advisor Series - Moderate Plan Dividend-NRI Option

 ICICI Prudential Aggressive Plan

 ICICI Prudential Aggressive Plan-Dividend Option

 ICICI Prudential Balanced Plan-Dividend

 ICICI Prudential Balanced Plan-Growth Option

 ICICI Prudential Cautious Plan

 ICICI Prudential Cautious Plan-Dividend Option

 ICICI Prudential Gilt Fund Investment Plan PF Option

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 ICICI Prudential Gilt Fund Treasury Plan PF Option

 ICICI Prudential Gilt Fund-Investment-Dividend

 ICICI Prudential Gilt Fund-Investment-Growth

 ICICI Prudential Gilt Fund-Treasury-Dividend

 ICICI Prudential Gilt Fund-Treasury-Growth

 ICICI Prudential Gilt Fund-Treasury-Half Yearly Dividend

 ICICI Prudential Moderate Plan

 ICICI Prudential Moderate Plan-Dividend Option

 ICICI Prudential Tax Plan-Dividend

 ICICI Prudential Tax Plan-Growth Option

 ICICI Prudential Very Aggressive Plan

 ICICI Prudential Very Aggressive Plan-Dividend Option

 ICICI Prudential Very Cautious Plan

 ICICI Prudential Very Cautious Plan-Dividend option

Unit linked Insurance plan

In earlier days, insurance was bought primarily for tax purposes and very few
people actually bothered about life cover as such. LIC was the only player and

29 | P a g e
offered money back policies, endowment policies and few single premium policies
like Bima Nivesh. However as an asset class it wasn’t considered as an option.
Now the scenario has completely changed, there are lots of private players and
many new options have come up. One among these new products is ULIPs which
are hugely popular and sold as an attractive asset with insurance/retirement benefit.
Insurers have developed plans that combine the benefits of life insurance as well as
giving various options of participating in the growth of capital market. Such plans
are called ULIP.
Unit Linked Insurance Plan is a life insurance policy which provides a combination
of life insurance protection and investment. ULIP is a most famous and safe way
of investment in current scenario.
In the event of the insured person’s untimely death, his nominees would normally
receive an amount that is higher of the sum assured (insurance cover) or the value
of the units (Investments). However, there are some schemes in which the policy
holder receives the sum assured plus the value of the investments.
Every insurance company has four to five ULIPs with varying investment options,
charges and conditions for withdrawals and surrender. Moreover, schemes have
been tailored to suit different customer profiles and, in that sense, offer a great deal
of choice.
The charges paid in these schemes in terms of entry load, administrative fees,
underwriting fees, buying and selling charges and asset management charges are
fairly high and vary from insurer to insurer in the quantum and also in manner in
which they are charged. Some of the other features offered by insurers along with
ULIPs are the following. These are not offered by all insurers. They offered by
icici Pru life only.
The policyholder can pay additional premium for investment at any time.
Partial or total withdrawal is allowed. Sometimes there are conditions attached.
Some insurers, not all, charge a redemption fee in such cases.
These policies will not entitled to any bonus
There is no annual bonus, but there may be a loyalty bonus paid at the end

Option of Funds

Reliance Life Insurance offer policyholders a choice of funds in which their

moneys may be invested like
Equity Fund: In this type of fund, sometimes also called Growth Funds, there
would be more investments in equities which are shares/ stocks traded in the stock
market.

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Debt Fund: In this type of fund, also called bond Funds, the investments are
primarily in government and government guaranteed securities and such safe debts
and other high investment grade corporate bonds.

Money Market Funds: In this type of fund, sometimes also called Liquid Funds,
the investment may be more in short term money market instruments such as
treasury bills, commercial papers, etc.

Balanced Fund: In this type of funds, the investments are in both equity as well as
debts.

Advantages of Unit Linked Insurance policies of ICICI PRU LIFE

The main three advantages of Unit Linked policies of reliance over Traditional
Policies are

Choice
· Freedom to choose Sum Assured of your choice for a given Premium.
· Freedom to choose where your money should be invested.
· Freedom to choose to withdraw your money according to your need.

Transparency
· Knowledge of exactly how much money has been deducted and for
What and exactly how much money has been invested?
· Knowledge of the value of your investment on any given day.

Flexibility
· Flexibility to increase my Sum Assured in the same policy at a later date without
paying extra premium.
· Flexibility to change your choice of investment at any time during the tenure of
your policy

The advantages of Mutual Fund

Mutual fund

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In the current investment circumstances this is an option which has shown a mind
boggling growth and it has become one of the most popular choices in recent
times. This is the segment which is the main competitor for the unit linked
insurance plans (ULIPS) of insurance companies.
Mutual fund is a common pool of money into which the investors place their
contributions that are to be invested in accordance with the stated objective. A
mutual fund is set up as a trust which supervises the function of an Asset
Management Company (AMC) which manages the investments in mutual
Funds.

Diversification: The best mutual funds design their portfolios so individual

investments will react differently to the same economic conditions. For example,
economic conditions like a rise in interest rates may cause certain securities in a
diversified portfolio to decrease in value. Other securities in the portfolio will
respond to the same economic conditions by increasing in value. When a portfolio
is balanced in this way, the value of the overall portfolio should gradually increase
over time, even if some securities lose value.

Professional Management: Most mutual funds pay topflight professionals to

manage their investments. These managers decide what securities the fund will buy
and sell.

Regulatory oversight: Mutual funds are subject to many government regulations

that protect investors from fraud.

Liquidity: It's easy to get your money out of a mutual fund. Write a check, make a
call, and you've got the cash.

Convenience: You can usually buy mutual fund shares by mail, phone, or over the
Internet.

Low cost: Mutual fund expenses are often no more than 1.5 percent of your
investment. Expenses for Index Funds are less than that, because index funds are
not actively managed. Instead, they automatically buy stock in companies that are
listed on a specific index.

The disadvantage of Mutual Fund

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No Guarantees: No investment is risk free. If the entire stock market declines in
value, the value of mutual fund shares will go down as well, no matter how
balanced the portfolio. Investors encounter fewer risks when they invest in mutual
funds than when they buy and sell stocks on their own. However, anyone who
invests through a mutual fund runs the risk of losing money.

Fees and commissions: All funds charge administrative fees to cover their day-to-
day expenses. Some funds also charge sales commissions or "loads" to compensate
brokers, financial consultants, or financial planners. Even if you don't use a broker
or other financial adviser, you will pay a sales commission if you buy shares in a
Load Fund.

Taxes: During a typical year, most actively managed mutual funds sell anywhere
from 20 to 70 percent of the securities in their portfolios. If your fund makes a
profit on its sales, you will pay taxes on the income you receive, even if you
reinvest the money you made.

Management risk: When you invest in a mutual fund, you depend on the fund's
manager to make the right decisions regarding the fund's portfolio. If the manager
does not perform as well as you had hoped, you might not make as much money
on your investment as you expected. Of course, if you invest in Index Funds, you
forego management risk, because these funds do not employ managers’ .A
measurement of an option position or premium in relation to the underlying
instrument. In mutual fund also there is certain amount of risk-return factor
associated according to the investment option these are as follows.

RISK FACTORS OF MUTUAL FUNDS

The Risk-Return Trade-off: 

The most important relationship to understand is the risk-return trade-off. Higher

the risk greater the returns/loss and lower the risk lesser the returns/loss. 
Hence it is up to you, the investor to decide how much risk you are willing to take.
In order to do this you must first be aware of the different types of risks involved
with your investment decision.

Market Risk: Sometimes prices and yields of all securities rise and fall. Broad
outside influences affecting the market in general lead to this. This is true, may it
33 | P a g e
be big corporations or smaller mid-sized companies. This is known as Market
Risk. A Systematic Investment Plan (“SIP”) that works on the concept of Rupee
Cost Averaging (“RCA”) might help mitigate this risk.

Credit Risk: The debt servicing ability (May it be interest payments or repayment
of principal) of a company through its cash flows determines the Credit Risk faced
by you. This credit risk is measured by independent rating agencies like CRISIL
who rate companies and their paper. An ‘AAA’ rating is considered the safest
whereas a ‘D’ rating is considered poor credit quality. A well-diversified portfolio
might help mitigate this risk.

Inflation Risk: Things you hear people talk about:

"Rs. 100 today is worth more than Rs. 100 tomorrow."
"Remember the time when a bus ride costed 50 paisa?"
"Mehangai Ka Jamana Hai."
The root cause is Inflation. Inflation is the loss of purchasing power over time. A
lot of times people make conservative investment decisions to protect their capital
but end up with a sum of money that can buy less than what the principal could at
the time of the investment. This happens when inflation grows faster than the
return on your investment. A well-diversified portfolio with some investment in
equities might help mitigate this risk.

Interest Rate Risk: In a free market economy interest rates are difficult if not
impossible to predict. Changes in interest rates affect the prices of bonds as well as
equities. If interest rates rise the prices of bonds fall and vice versa. Equity might
be negatively affected as well in a rising interest rate environment. A well-
diversified portfolio might help mitigate this risk.

Political/Government Policy Risk: Changes in government policy and political

decision can change the investment environment. They can create a favorable
environment for investment or vice versa.

Liquidity Risk: Liquidity risk arises when it becomes difficult to sell the securities
that one has purchased. Liquidity Risk can be partly mitigated by diversification,
staggering of maturities as well as internal risk controls that lean towards purchase
of liquid securities.

Risk Return Matrix (ILLUSTRATION 4)

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Empirical Study

5.1 ULIPs v/s Traditional ‘With Profit’ Policies

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Unit-linked insurance plans, ULIPs, are distinct from the more familiar ‘with
profits’ policies sold for decades by the Life Insurance Corporation. With profits’
policies are called so because investment gains (profits) are distributed to
policyholders in the form of a bonus announced every year. ULIPs also serve the
same function of providing insurance protection against death and provision of
long-term savings, but they are structured differently.

In ‘with profits’ policies, the insurance company credits the premium to a common
pool called the ‘life fund,’ after setting aside funds for the risk premium on life
insurance and management expenses. Every year, the insurer calculates how much
has to be paid to settle death and maturity claims. The surplus in the life fund left
after meeting these liabilities is credited to policyholders’ accounts in the form of a
bonus. In a ULIP too, the insurer deducts charges towards life insurance (mortality
charges), administration charges and fund management charges. The rest of the
premium is used to invest in a fund that invests money in stocks or bonds. The
policyholder’s share in the fund is represented by the number of units. The value of
the unit is determined by the total value of all the investments made by the fund
divided by the number of units. If the insurance company offers a range of funds,
the insured can direct the company to invest in the fund of his choice. Insurers
usually offer three choices — an equity (growth) fund, balanced fund and a fund
which invests in bonds.

The strong arguments in favor of unit-linked plans are that — the investor knows
exactly what is happening to his money and two; it allows the investor to choose
the assets into which he wants his funds invested. An investor in a ULIP knows
how much he is paying towards mortality, management and administration
charges. He also knows where the insurance company has invested the money. The
investor gets exactly the same returns that the fund earns, but he also bears the
investment risk. The transparency makes the product more competitive.

A traditional ‘with profits,’ on the other hand, is a black box and a policyholder
has little knowledge of what is happening. Traditional ‘with profits’ policies too
invest in the market and generate the same returns prevailing in the market. But
here the insurance company evens out returns to ensure that policyholders do not
lose money in a bad year. In that sense they are safer. As IRDA is a regulating
authority for Insurance, so it has its total control over the business of all Insurance
companies. On July 1, 2006, the IRDA introduced revised ULIP guidelines. The
following are the provisions of the latest guidelines:

1. Term/Tenure
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The ULIP client must have the option to choose a term/tenure.
If no term is defined, then the term will be defined as '70 minus the age of the
client'. For example if the client is opting for ULIP at the age of 30 then the policy
term would be 40 years. The ULIP must have a minimum tenure of 5 years.

2. Sum Assured
On the same lines, now there is a sum assured that clients can associate with. The
minimum sum
Assured is calculated as:
(Term/2 * Annual Premium) or (10 * Annual Premium) whichever is higher.
There is no clarity with regards to the maximum sum assured.
The sum assured is treated as sacred under the new guidelines; it cannot be reduced
at any point during the term of the policy except under certain conditions - like a
partial withdrawal within two years of death or all partial withdrawals after 60
years of age. This way the client is at ease with regards to the sum assured at his
disposal.

3. Premium payments
If less than first 3 years premiums are paid, the life cover will lapse and policy will
be terminated by paying the surrender value. However, if at least first 3 years
premiums have been paid, then the life cover would have to continue at the option
of the client.

4. Surrender value
The surrender value would be payable only after completion of 3 policy years.

5. Top-ups
Insurance companies can accept top-ups only if the client has paid regular
premiums till date. If the top-up amount exceeds 25% of total basic regular
premiums paid till date, then the client has to be given a certain percentage of sum
assured on the excess amount. Top-ups have a lock-in of 3 years (unless the top-up
is made in the last 3 years of the policy).

6. Partial withdrawals
The client can make partial withdrawals only after 3 policy years.

7. Settlement
The client has the option to claim the amount accumulated in his account after
maturity of the term of the policy up to a maximum of 5 years. For instance, if the

37 | P a g e
ULIP matures on January 1, 2007, the client has the option to claim the ULIP
monies till as late as December 31, 2012. However, life cover will not
be available during the extended period.

8. Loans
No loans will be granted under the new ULIP.

9. Charges
The insurance company must state the ULIP charges explicitly. They must also
give the method of deduction of charges.

10. Benefit Illustrations

The client must necessarily sign on the sales benefit illustrations. These
illustrations are shown to the client by the agent to give him an idea about the
returns on his policy. Agents are bound by guidelines to show illustrations based
on an optimistic estimate of 10% and a conservative estimate of 6%. Now clients
will have to sign on these illustrations, because agents were violating these
guidelines and projecting higher returns.
1. Regular disclosure of detailed ULIP portfolios. This is a problem with the
industry; for all their talk on being just like (or even better than) mutual funds,
ULIP portfolios are nowhere near their mutual fund counterparts in frequency as
well as in transparency.
2. On the same lines, other data points like portfolio turnover ratios need to be
mentioned clearly so clients have an idea on whether the fund manager is investing
or punting.
3. ULIPs (especially the aggressive options) need to mention their investment
mandate, is it going to aim for aggressive capital appreciation or steady growth. In
other words will it be managed aggressively or conservatively? Will it invest in
large caps, mid caps or across both segments? Will it be managed with the growth
style or the value style?
4. Exposure to a stock/sector in a ULIP portfolio must be defined. Diversified
equity funds have a limit to how much they can invest in a stock/sector. Investment
guidelines for ULIPs must also be crystallized. Our interaction with insurance
companies indicates that there is little clarity on this front; we believe that since
ULIPs invest so heavily in stock markets they must have very clear-cut invest
funds in terms of their structure of statement guidelines.

Comparison of ULIP Vs Mutual Fund on different issues as follows

38 | P a g e
Unit Linked Insurance Policies (ULIPs) as an investment avenue are closest to
mutual funds in terms of their structure and functioning. As is the cases with
mutual funds, investors in ULIPs are allotted units by the insurance company and a
net asset value (NAV) is declared for the same on a daily basis.
Similarly ULIP investors have the option of investing across various schemes
similar to the ones found in the mutual funds domain, i.e. diversified equity funds,
balanced funds and debt funds to name a few.
Generally speaking, ULIPs can be termed as mutual fund schemes with an
insurance component. However it should not be construed that barring the
insurance element there is nothing differentiating mutual funds from ULIPs.

1. Mode of investment/ investment amounts

Mutual fund investors have the option of either making lump sum investments or
investing using the systematic investment plan (SIP) route which entails
commitments over longer time horizons. The minimum investment amounts are
laid out by the fund house. ULIP investors also have the choice of investing in a
lump sum (single premium) or using the conventional route, i.e. making premium
payments on an annual, half-yearly, quarterly or monthly basis. In ULIPs,
determining the premium paid is often the starting point for the investment
activity.
This is in stark contrast to conventional insurance plans where the sum assured is
the starting point and premiums to be paid are determined thereafter.
ULIP investors also have the flexibility to alter the premium amounts during the
policy's tenure. For example an individual with access to surplus funds can
enhance the contribution thereby ensuring that his surplus funds are gainfully
invested; conversely an individual faced with a liquidity crunch has the option of
paying a lower amount (the difference being adjusted in the accumulated value of
his ULIP). The freedom to modify premium payments at one's convenience clearly
gives ULIP investors an edge over their mutual fund counterparts.

2. Expenses
In mutual fund investments, expenses charged for various activities like fund
management, sales and marketing, administration among others are subject to pre-
determined upper limits as prescribed by the Securities and Exchange Board of
India.
For example equity-oriented funds can charge their investors a maximum of 2.5%
per annum on a recurring basis for all their expenses; any expense above the
prescribed limit is borne by the fund house and not the investors.

39 | P a g e
Similarly funds also charge their investors entry and exit loads (in most cases,
either is applicable). Entry loads are charged at the timing of making an investment
while the exit load is charged at the time of sale.
Insurance companies have a free hand in levying expenses on their ULIP products
with no upper limits being prescribed by the regulator, i.e. the Insurance
Regulatory and Development Authority. This explains the complex and at times
'unwieldy' expense structures on ULIP offerings. The only restraint placed is that
insurers are required to notify the regulator of all the expenses that will be charged
on their ULIP offerings. Expenses can have far-reaching consequences on
investors since higher expenses translate into lower amounts being invested and a
smaller corpus being accumulated.

3. Portfolio disclosure
Mutual fund houses are required to statutorily declare their portfolios on a
quarterly basis, albeit most fund houses do so on a monthly basis. Investors get the
opportunity to see where their monies are being invested and how they have been
managed by studying the portfolio. There is lack of consensus on whether ULIPs
are required to disclose their portfolios. During our interactions with leading
insurers we came across divergent views on this issue. While one school of thought
believes that disclosing portfolios on a quarterly basis is mandatory, the other
believes that there is no legal obligation to do so and that insurers are required to
disclose their portfolios only on demand. Some insurance companies do declare
their portfolios on a monthly/quarterly basis. However the lack of transparency in
ULIP investments could be a cause for concern considering that the amount
invested in insurance policies is essentially meant to provide for contingencies and
for long-term needs like retirement; regular portfolio disclosures on the other hand
can enable investors to make timely investment decisions.

4. Flexibility in altering the asset allocation

As was stated earlier, offerings in both the mutual funds segment and ULIPs
segment are largely comparable. For example plans that invest their entire corpus
in equities (diversified equity funds), a 60:40 allotment in equity and debt
instruments (balanced funds) and those investing only in debt instruments (debt
funds) can be found in both ULIPs and mutual funds. If a mutual fund investor in a
diversified equity fund wishes to shift his corpus into a debt from the same fund
house, he could have to bear an exit load and/or entry load. On the other hand most
insurance companies permit their ULIP inventors to shift investments across
Various plans/asset classes either at a nominal or no cost (usually, a couple of
switches are allowed free of charge every year or a cost has to be borne for
additional switches). Effectively the ULIP investor is given the option to invest
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across asset classes as per his convenience in a cost-effective manner. This can
prove to be very useful for investors, for example in a bull market when the ULIP
investor's equity component has appreciated, he can book profits by simply
transferring the requisite amount to a debt-oriented plan.

5. Tax benefits
ULIP investments qualify for deductions under Section 80C of the Income Tax
Act. This holds good, irrespective of the nature of the plan chosen by the investor.
On the other hand in the mutual funds domain, only investments in tax-saving
funds (also referred to as equity-linked savings schemes) are eligible for Section
80C benefits.
Maturity proceeds from ULIPs are tax free. In case of equity-oriented funds (for
example diversified equity funds, balanced funds), if the investments are held for a
period over 12 months, the gains are tax free; conversely investments sold within a
12-month period attract short-term capital gains tax @10%.Similarly, debt-
oriented funds attract a long-term capital gains tax @ 10%, while a short-term
capital gain
is taxed at the investor's marginal tax rate. Despite the seemingly similar structures
evidently both mutual funds and ULIPs have their unique set of advantages to
offer. As always, it is vital for investors to be aware of the nuances in both
offerings and make informed decisions.

41 | P a g e
5.3 Some facts for the growth of mutual funds in India

· 100% growth in the last 6 years.

· Numbers of foreign AMC’s are in the queue to enter the Indian markets like
Fidelity Investments, US based, with over US$1trillion assets under management
worldwide.

· Our saving rate is over 23%, highest in the world. Only channelizing these
savings in mutual funds sector is required.

· We have approximately 29 mutual funds which are much less than US having
more than 800. There is a big scope for expansion.

· 'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are
concentrating on the 'A' class cities. Soon they will find scope in the growing
cities.

· Mutual fund can penetrate rural like the Indian insurance industry with simple
and limited products.
· SEBI allowing the MF's to launch commodity mutual funds.

· Emphasis on better corporate governance.

· Trying to curb the late trading practices.

· Introduction of Financial Planners who can provide need based advice.

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Findings and Suggestions

 After survey there are some findings and suggestions as follows. These
findings and suggestions are explained with the help of Following tables and
Illustrations

 As insurance sector is growing rapidly so most of the life insurance players

are selling ULIP plans. And the awareness about ULIP is growing most of
the people knows the ULIP of life insurance. Since last 4-5 years the returns
provided by ULIP were very good so people tend more to words ULIP.

 Middle class people who are interested in investment but they are not aware
of such options so more awareness should be there, as main target customer
are the middle class people of Ranchi.

 While investing any insurance company customer prefers for good branded
company like ICICI Prudential is India’s one of the most famous and big
company. And second preference is given to SBI life as many people
perceive that SBI Life is a govt. owned company so people want security for
their investment.

 As now till date people in India don’t wanted to invest in share market
because then were thinking that it is a bad thing but as the awareness about
Mutual fund is increasing as more and more private players are entering in
the market. So awareness about MF is good and it can be improved.

 While survey I found that many all customers had already invested in ULIP
and Mutual Fund some people had invested in both options. 44% of people
had invested in Mutual Fund and 56% people had invested in ULIP and 11%
people had invested in both the options.

 While investing in Mutual Fund the preference for the fund are changing as
per the age of the customer means the people from the age group of 25-40
who are generating more income, they are risk takers and most of them
preferring the equity fund.

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  As age is increasing the investment pattern moving towards more secured
options like balanced and debt funds. All age group people are tending to
invest in Tax saving funds to avail the tax deduction.

 While investing in mutual fund 80% investors preferring more to the returns
the mutual fund is providing and 60% for the Investment and Liquidity
reasons.

 First reason or preference that why an investor is interested in ULIP is

Investment Purpose, and second is to its returns and after that they investing
because they are getting the tax benefit. Then again there are some people
who are investing for pension planning and security.
 In future people will be more preferring to the security of their money means
they want a secured option which should provide good returns. As ULIP are
the option in which you can have the security also and good returns. The
second choice of the investors is return of their money.

 As most of the people want the option which should provide security and
good returns and there is only option available with good liquidity is ULIP
of ICICI. 54% people had opted for ULIP as their future investment and
45% of people opted for Mutual Fund. So we can find that there not so much
difference in these option.

 62% of people given Best rating to the ICICI Prudential ULIP, so from this
we can analyze that ICICI Pru life is doing good but it is having good
potential in Market. To improve its market share they should improve the
awareness level of the common people.

 Innovative Products and good brand name are the main success factor for
ICICI PRUDENTIAL LIFE. 35% customers are attracted due to the
Innovative products offered by ICICI. So if ICICI wants to penetrate its
market share they should improve the marketing strategy, improving the
distribution channel etc.

Demographic Analysis

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The Segmentation of sample as on the basis of gender, age, family status, annual
income, occupation etc. the demographic profile is as follows

Demographic Profile (Table No.5)

Frequency percentage
Gender
Male 255 69%
Female 115 31%
Total 370 100%
Age
21-30 140 37%
31-40 80 22%
41-50 108 29%
More than 50 42 12%
370 100%
Total(approx)
married 214 58%
single 156 42%
Total(approx) 370 100%
Annual income(lakh)
Up to 1 lakh 128 35%
1-2 140 37%
2-3 44 12%
3-4 32 9%
More than 4 26 7%
Total (approx) 370 100%
Occupation

Civil servant 60 16%

Private Employee 48 13%
Self-Employed 32 8.5%
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 Businessman/women 102 28%
Farmer 32 8.5%
Others 96 26%
Total 370 100%

Awareness about ULIP Insurance (TABLE-6)

No of response Awareness about Ulip

335 yes
35 no
370 Total(number of respondents)

Awareness about ulip(Illustration number-5)

no of response

yes
no

Interpretation
As insurance sector is growing rapidly so most of the life insurance players are
selling ULIP plans. And the awareness about ULIP is growing most of the people
knows the ULIP of life insurance. Since last 4-5 years the returns provided by
ULIP were very good so people tend more to words ULIP.
Company preference for ULIP

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Company Preference ( Table No.7)
Responses Company Name
(No. of Persons)

155 Icici pru life

80 Reliance Life Insurance
55 Lic
45 Hdfc
35 Bajaj allianz

Company Preference (Illustration No.6)

no. of response

icici pru
reliance life
lic
hdfc
bajaj allianz

Interpretation
While investing any insurance company customer prefers for good branded company ICICI is
India’s one of the most famous and richest family. And second preference is given to
RELIANCE life as many people perceive that it is more secured because owned by Reliance
company so people want security for their investment.

47 | P a g e
Awareness about Mutual Fund (TABLE -8)

Awareness about mutual fund No. of response

yes 324
no 46
total 370

Awareness about Mutual Fund (ILLUSTRATION-7)

response

yes
no
total

Interpretation
As now till date people in India don’t wanted to invest in share market because then were
thinking that it is a bad thing but as the awareness about Mutual fund is increasing as more and
more private players are entering in the market. So awareness about MF is good and it can be
improved.

Existing investors in ULIP and Mutual Fund

Option in which already Invested (Table -9)

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 Sr. no Investment option Response
1 Mutual fund 160
2 Ulip 210
Total 370

Interpretation
While survey I found that many all customers had already invested in ULIP and
Mutual Fund some people had invested in both options. 44% of people had
invested in Mutual Fund and 56% people had invested in ULIP and 11% people
had invested in both the options.

Fund Preference while investing in a Mutual Fund

Selection of Fund in MF (Table No-10)

Sr. no Name of the Number of Age

fund response
1 Equity fund 146 25-40
2 Debt fund 27 50-65
3 Balanced fund 40 40-50
4 Tax saving 57 25-60
funds

Interpretation

While investing in Mutual Fund the preference for the fund are changing as per the age of the
customer means the people from the age group of 25-40 who are generating more income, they
are risk takers and most of them preferring the equity fund. As age is increasing the investment
pattern moving towards more secured options like balanced and debt funds. All age group people
are tend to invest in Tax saving funds to avail the tax deduction.

Factors considering most to invest in Mutual Fund

Reasons to invest in Mutual Fund ( Table- 11)

Sr.no Factors considered Number of response

most while
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 investment
1. Only investment 60
2. Good return 80
3. liquidity 60
Total 200

Reasons to invest in mutual fund (ILLUSTRATION-8)

response

only investment
good return
liquidity

Interpretation

While investing in mutual fund 80% investors preferring more to the returns the mutual fund is
providing and 60% for the Investment and Liquidity reasons.

Reasons to Invest In ULIP

Factors considered while investing in ULIP (Table -12)

Sr. no Factors considered responses

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 1 investment 70
2 security 40
3 Pension planning 35
4 Good return 65
5 Tax relief 50
total 250

Reasons to Invest In ULIP (ILLUSTRATION-9)

response

investment
security
pension planing
good return
tax relief

INTERPRETATION
First reason or preference that why an investor is interested in ULIP is Investment
Purpose, and second is to its returns and after that they investing because they are
getting the tax benefit. Then again there are some people who are investing for
pension planning and security.

Reasons to invest in ICICI PRU LIFE ULIP

USP of ICICI PRU Life Insurance (Table - 13 )

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 Sr. no factors response
1 Innovative products 110
2 Good return 70
3 Good brand name 90
4 Good marketing strategy 65
total 335

Reasons to invest in ICICI PRU LIFE ULIP (ILLUSTRATION-10)

response

innovative products
good return
good brand name
good marketing strategy

Illustration
Innovative Products and good brand name are the main success factor for ICICI
Pru Life Insurance. 35% customers are attracted due to the Innovative products
offered by ICICI PRU. So if ICICI PRU wants to penetrate its market share they
should improve their marketing strategy, improving the distribution channel etc.

Conclusions and/or Recommendations

1. From above analysis and survey we can conclude as follows

52 | P a g e
2. Awareness of ULIP is increasing as more number of private players are entering
in life insurance industry.

3. Mutual Fund is also getting more and more famous in Indian market as many
private companies innovating new funds as the investors demand.

4. ULIP differentiates from Mutual fund in respect of Insurance cover.

5. Investors in ICICI Pru Life ULIP will be getting the advantage of life insurance
cover.

6. ULIP and Mutual fund are providing same type of investment funds like, equity
funds, debt funds, infrastructure fund, balanced fund etc.

7. In terms of expenses mutual funds are having low expenses as compared to

ULIP of ICICI Pru life insurance.

8. Mutual fund charging 1% to 2.5% as entry and exit load, ICICI Pru life
insurance are charging 3.5%-6% yearly as asset allocation charges.

9. People are turning to words the ULIP as a good investment option but as ULIP
is in its starting phase so customers prefer only big brands.

10. Mutual fund is having good growth but many customers from rural areas don’t
have any knowledge about Mutual fund.

11. Even investors from cities like Ranchi don’t have that much of Knowledge
about fund selection they all are depend on Brokers.

12. People in Ranchi are investing in only good branded companies as they don’t
believe on other financial companies for taking ULIP.

13. There is a need for insurers to undertake a demand audit in order to understand
what the policyholder wants and needs.
14. Deriving the right feedback from customers and bringing out innovative
products, Company which caters to customer demands will go a long way in
tapping the market potential of the insurance and Mutual fund sector.

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15. Mutual fund and ULIP insurance both are facing fierce competition;
increasingly more organizations are seeking to enhance their demand in the market
place.

16. For ICICI Pru Life Insurance They should go for creating more awareness
about its ULIP as now also people are just investing because ICICI is India’s most
Known .

17. ICICI Pru Life should go for innovation more and more products and
improving the distribution channels as per the area of sales.

Appendices

 (A) Computation

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Hypothesis testing

H 0 - People will not prefer investment in ULIP of ICICI PRU LIFE as Compared
to mutual fund offered by ICICI

H 1 - People will prefer investment in ULIP of ICICI as Compared to mutual fund

Of ICICI

The Sample size taken for this Hypothesis is 370. The preference of 370 will be
recorded and can be analyzed by ‘z’ test. Because sample size is more than 30
I have taken the response of 370 people. 210 persons had given positive preference
for ICICI Life ULIP.

MEAN=210

µ=370

σ=10
Sample size > 30

Z = X 

Z = 210-370/10

= -16

Level of significance = 5% i.e.1.96

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

Two tailed test

-16 falls in rejection region so Ho is rejected

H0 is rejected and H1 is accepted then we can say that People will prefer
investment in ULIP of ICICI PRULIFE as Compared to mutual fund in Ranchi

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(B) Questionnaire

ULIP or Mutual Fund

Name of the Person __________________________________________

Address _______________________________________________

_______________________________________________

Phone N0. _______________________________________________

Occupation _______________________________________________

Age _______________________________________________

Education ___________________________________________
____
Average Annual Income

50000 -100000

100000 -200000

More than 200000

Q1) Do you know About ULIP Insurance?

Yes No

Q2) Do you have taken any ULIP insurance policy? Can you name it?

Yes No

_____________________________________________

Q3) If yes, which company’s ULIP you have taken and why?

For investment
57 | P a g e
For Security

For Pension planning

For Good returns

For Tax Relief only

Q.4) Do you know about Mutual fund?

Yes No

Q5) Do you have taken any Mutual Fund? Can you name it?

Yes No

Q6) If yes, which company’s Mutual Fund you have taken and why?

________________________________________________

For only Investment

For Good returns

For Liquidity

Q7) which is the factor you consider the most while choosing any
Investment Option?

Returns Security of money

Q8) Whom Do you prefer first for investment?

ULIP Mutual Fund

Q9) How would you rate ICICI Pru life insurance ULIP?

Fair Average Good Best

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Q10) what is the Main Reason to Invest in ICICI ULIP?
Innovative Products

Good returns

Good Brand Name

Good Marketing strategy

References

1. S.Balchandran, IRDA, IC-33 LIFE INSURANCE

2. E. Mrudula. & Priya Raju.Mutual Fund Industry in India

3. Mary Rowland, the New Commonsense Guide to Mutual Funds

www. Visionbooksindia.com

4. “Life Insurance Industry in India” http://www.irda.gov.in:

5. “History and Profile of ICICI Pru life, www.iciciprulife.com

6. Profile of ICICI AMC: www.icicipruamc.com

7. www.amfiindia.com

8. www.investing.businessweek.com

9. www.mutualfundsindia.com

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Glossary

Agent
A securities firm is classified as an agent when it acts on behalf of its clients as
buyer or seller of a security. The agent does not own the security at any time
during the transaction.

Annual Report
A publication, including financial statements and a report on operations, issued by
a company to its shareholders at the end of company's fiscal year.

Bonds
Promissory notes issued by a corporation or government to its lenders, usually with
a specified amount of interest for a specified period of time.

Book
An electronic record of all pending buys and sells orders for a particular stock.

Capital
To an economist, capital means machinery, factories and inventory required to
produce other products. To investors, capital means their cash plus the financial
assets they have invested in securities, their home and other fixed assets.

Commission
The fee charged by an investment advisor or broker for buying or selling securities
as an agent on behalf of a client.

Commodities
Products used for commerce that are traded on a separate, authorized commodities
exchange. Commodities include agricultural products and natural resources such as
timber, oil and metals. Commodities are the basis for futures contracts traded on
these exchanges.

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Common Shares or Common Stock
Securities that represent part ownership in a company and generally carry voting
privilege. Common shareholders may be paid dividends, but only after preferred
shareholders are paid. Common shareholders are last in line after creditors, debt
holders and preferred shareholders to claim any of a company's assets in the event
of liquidation.
Corporation or Company
A form of business organization created under provincial or federal laws that have
a legal identity separate from its owners. The shareholders are the corporation's
owners and are liable for the debts of the corporation only up to the amount of their
investment. This is known as limited liability.

Dividend
The portion of the issuer's equity paid directly to shareholders. It is generally paid
on common or preferred shares. The issuer or its representative provides the
amount, frequency (monthly, quarterly, semi-annually, or annually), payable date,
and record date. The exchange that the issue is listed on sets the ex
dividend/distribution (ex-d) date for entitlement. An issuer is under no legal
obligation to pay either preferred or common dividends.

Earnings per Share (EPS)

A listed issuer's earnings per share/unit (EPS) reported by TSX is EPS as presented
by the issuer, including special items, such as extraordinary items or discontinued
operations. EPS is reported according to Canadian Generally Accepted Accounting
Principles (GAAP), except for a small number of foreign issuers that may report
according to different accounting standards. If EPS is not reported by the issuer, it
will not be calculated by TSX.

Equities
Common and preferred stocks, which represent a share in the ownership of a
company

Face Value
The cash denomination of the individual debt instrument. It is the amount of
money that the holder of a debt instrument receives back from the issuer on the
debt instrument's maturity date. Face value is also referred to as par value or
principal.

Insurance agent
Individual licensed to sell insurance.
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Portfolio
Holdings of securities by an individual or institution. A portfolio may include
various types of securities representing different companies and industry sectors.

Preferred Share
A class of share capital that entitles the owner to a fixed dividend ahead of the
issuer's common shares and to a stated dollar value per share in the event of
liquidation. It usually does not have voting rights, unless a stated number of
dividends have been omitted.

Yield
This is the measure of the return on an investment and is shown as a percentage. A
stock yield is calculated by dividing the annual dividend by the stock's current
market price. For example, a stock selling at $50 and with an annual dividend of
$5 per share yields 10%. A bond yield is a more complicated calculation, involving
annual interest payments, plus amortizing the difference between its current market
price and par value over the life of the bond.

Transactions
As reported in exchange trading statistics, represents the total number of trades for
a specified period

Securities
Transferable certificates of ownership of investment products such as notes, bonds,
stocks, futures contracts and options.

Net Asset Value (NAV)

Net Asset Value is the market value of the assets of the scheme minus its
liabilities. Per unit NAV is the net asset value of the scheme divided by the number
of units outstanding on the Valuation Date.

Load
This is the price of buying a unit. Most funds sell units at a premium to its
underlying net asset value, and purchase them at the net asset value. When the fund
company charges a load when it sells units, it is called entry load. When it charges
a load at the time of buying the units back from an investor, it is called exit load.

Investment banker
62 | P a g e
Firm that sells stocks or bonds to brokerages which, in turn, sell them to investors
on a securities exchange.

Investment Company
Firm that, for a management fee, invests pooled funds of small investors in
securities appropriate for its stated investment objectives.
Share
Unit of ownership.

Shareholder
One who owns share. In a mutual fund, this person has voting rights.

Common stock
Unit of ownership in a public corporation with voting rights, but with lower
priority than either preferred stock or bonds if the company is ever liquidated.

Assets
Everything a company or person owns, including money, securities, equipment and
real estate. Assets include everything that is owed to the company or person.
Assets are listed on a company's balance sheet or an individual's net worth
statement.

Subscription Price
Price at which the issue of security can be subscribed to by the investors.

Sale Price
The price you pay when you invest in a scheme. Also called offer Price. It may
include a sales load.

Repurchase Price
The price at which a close-ended scheme repurchases its units and it may include
a back-end load. This is also called Bid Price.

Redemption Price
Is the price at which open-ended schemes repurchase their units and close-ended
schemes redeem their units on maturity. Such prices are NAV related.

Sales Load
A charge collected by a scheme when it sells the units. Also called, ‘Front-end’
load. Schemes that do not charge a load are called ‘No Load’ schemes.
63 | P a g e
Repurchase or ‘Back-end’ Load
A charge collected by a scheme when it buys back the units from the unit holders.

Investment Company
Firm that, for a management fee, invests pooled funds of small investors in
securities appropriate for its stated investment objectives.

Junk bond funds

Mutual funds that invest in bonds issued by companies or governments that are
rated below BBB by Standard and Poor's or Moody's. Also know as high-yield
bond funds.

Long-term bond funds

Mutual funds that invest in bonds that mature in more than 10 years.

No-load mutual fund

Mutual fund that is sold without sales commission.

Open-end funds
Funds that permit ongoing purchase and redemption of fund shares (mutual funds
are open-end funds).

Over-the-counter market
Market that uses a network of brokers to buy and sell securities rather than an
exchange.

Precious metals mutual fund

Mutual funds that invest in precious metals and mining stocks.

Preferred stock
Type of stock that takes priority over common stock in the payment of dividends
or if the company is liquidated.

Secondary market
Market wherein bonds, stocks, or other securities are bought and sold after they're
already issued.

Securities
Stocks, bonds, or rights to ownership, such as options, typically sold by a broker.
64 | P a g e
Securities exchange
Tightly regulated marketplace where stocks, bonds, and cash are traded.

Share
Unit of ownership.

Short-term bond funds

Mutual funds that generally invest in bonds that mature in less than three years.

Competitor
The auction participant on the same side of the Initiator's order. If the Initiator is a
buyer then the competitor enters buy orders for the same security.

Closing Price
The trade price of a security at the end of a trading day. Based on the closing price
of the security, the base price at the beginning of the next trading day is calculated.

Portfolio
A combination of assets or collection of securities owned by individual or
institution.

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