19 SP PR

A
PROJECT REPORT
ON
“MUTUAL FUND AS AN INVESTMENT OPTION”
Submitted in partial fulfilment of the requirement for the award of

Degree of Master of Management Studies (MMS)
In Finance
Submitted By
Aakash Deepak Gawade
Roll no -19
(Masters in Management Studies 2023-24)
Under the Guidance of
Dr. Abhiraj Shivdas
University of Mumbai’s
Alkesh Dinesh Mody Institute for Financial and Management Studies
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University of Mumbai’s
Alkesh Dinesh Mody Institute for Financial
and Management Studies
Certificate
I, Professor Dr. Abhiraj Shivdas hereby certify that Mr./Ms. Aakash Gawade,
SYMMS Student of Alkesh Dinesh Mody Institute for Financial and
Management Studies, has completed a project titled Mutual Fund as an
Investment Option in the area of specialization Finance for the academic year
2023-2024. The work of the student is original and the information included
in the project is true to the best of my knowledge.
MMS Coordinator Director
Prof Naina Salve Dr Smita Shukla
Internal Guide External Examiner

Dr. Abhiraj Shivdas
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Declaration
I, Mr./Ms. Aakash Gawade SYMMS Student of Alkesh Dinesh Mody Institute

for Financial and Management Studies, hereby declare that I have completed
the project titled Mutual Fund as an Investment option during the academic
year 2023-2024.
The report work is original and the information/data included in the report is
true to the best of my knowledge. Due credit is extended on the work of
Literature/Secondary Survey by endorsing it in the Bibliography as per
prescribed format.
Aakash Deepak Gawade
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Acknowledgement
It gives me immense pleasure to present this project report “Mutual Fund and Investment
option”. Studying on Mutual fund was amazing experience now I would like to
acknowledge every person who contributed to complete my project by giving proper
Guidance.
First and foremost, I would like to express my deepest gratitude to prof. Sanjeev Thakur
sir for his valuable time and advice in the making of this project. I would like to express
my gratitude to every person who extended his guidance and support for bringing out this
report in the best possible way.
About my Project, I would like to thank each one who offered help, guideline, and support
whenever required.
Aakash Gawade
MMS Finance 2022-2024
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▪ Table of Content
Sr. No Particulars Page No
1 Executive Summary 7
2 Objective of Study and Research Methodology 8
3 Introduction 9
4 Literature Review 11
5 International history of Mutual fund 13
6 Mutual Funds in India 14
7 Process of Mutual Fund Working 18
8 Structure Of Mutual Fund 21
9 Regulatory structure of Mutual fund 24
10 Evolution of Mutual Fund Industry in India 27
11 Factors to be considered while Selecting Mutual Fund 30

Category
12 Factors to be considered while Selecting Mutual Fund Scheme 32
13 How to choose best Mutual fund scheme 38
14 List of Some Top Mutual Funds Scheme 43
15 Mutual Funds Scheme according to Maturity 54
16 Professional Expertise 60
17 Registration process to Investment 62
5
18 Mutual fund Distribution channel 68
19 Features studied by investors In Mutual Fund 71
20 When are Mutual Fund considered a Bad Investment? 78
21 Mutual fund Recent Updates 80
22 Regulatory Action 90
23 Statement of study and Limitation 92
24 Survey Questions and Data Analysis 93
25 Resources to Study About Mutual Fund 98
26 Glossary 99
27 References 100
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Executive Summary:
In recent years, mutual funds have gained popularity as a means of ensuring one's financial
security. Mutual funds have not only contributed to India's growth, but they have also aided
families in capitalizing on the country's success. As knowledge and awareness about mutual
funds grows, more people are reaping the benefits of investing in them. The fact that nine out
of ten Indians are unaware that mutual funds exist is the fundamental reason for the low number
of retail mutual fund investors. However, once consumers are aware of mutual fund options,
the percentage of people who decide to invest in mutual funds rises to one in every five. The
trick for converting a person with no knowledge of mutual fund to new investors are more
likely to buy mutual funds and to use the right arguments in the sales process that customers
will accept as important and relevant to their decisions.
The project gave me great learning experience and at the same time it gave me enough scope
to implement my analytical ability. The analysis and advice presented in this project report is
based on market research on saving and investment practices of the investors and preferences
of the investors for investment in mutual funds. This report will help to know about the
investors preferences in mutual fund means Investor preferences in various schemes.
At start of project report all details regarding Mutual fund are given to understand what Mutual
fund is? it has also covered process of mutual fund working, evolution of mutual fund, how to
choose best mutual fund schemes? what feature to be studied for investing in Mutual fund?,
how to identify bad mutual fund by studying its feature ?And many other things related to
Mutual fund. In short, all details regarding Mutual fund investment are covered in this project
report.
At the end of project data analysis of collected data for this project is mentioned. For the
collection of data, I made a questionnaire and collected the data. Thus, in whole Project report
try to cover “Mutual Fund as an Investment Option”
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Objective of study and Research
The study's main goal is to learn what individuals think about mutual funds as an investment
choice that might yield substantial returns if properly researched and invested in. Before
investing in a mutual fund, it is a good idea to seek professional guidance because your
hard-earned money needs to provide you with decent returns in order to combat inflation
and expand your wealth. The research was done as a final year specialization project.
Another reason for choosing this topic is to raise awareness about how Mutual Funds can
be a suitable investment vehicle.
Research has been done in form of preparing a questionnaire and then collection of data to
know the awareness about mutual fund in the society. The Research was conducted to
Saphale-Makunsar region. The questionnaire was circulated and then response collected.
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Introduction
Pandemic has shown the importance of financial planning. All country, state, private
organization, public organization has faced huge financial losses. So, for financial growth of
every individual there are many alternatives for investment. Mutual Fund is one of the popular
investment tools so “Mutual Fund as an investment option’ ’will help to understand how
investment in mutual fund can give you huge return if invested with proper planning and for
long period to get compounding of invested principle.
Investing in various types of assets is an interesting activity which attracts people from all
walks of life irrespective of people's occupation, economic status, education and family
background. When a person has more money than he requires for current consumption, he
would be coined as a good investor. The investor who is having extra cash could invest it in
securities and in any other assets like gold or real estate or could simply deposit it in his bank
account. The companies that have extra income may like to invest their money in the extension
of their existing firm or undertake new venture. All of these activities in a broader sense are
mean of investment. The investment alternatives range from financial securities to the
traditional no security investments.
The financial securities may be negotiable or non-negotiable. The negotiable securities are
financial securities which are transferable. That may yield variable income or fixed income.
Securities like equity shares fall under variable income group as income generated, depends
upon the dividend distributed by all these companies from the profit that it makes. Bonds,
debentures, Indira Vikas Patras, Kisan Vikas Patras, Government securities and money market
securities yield a fixed income. The non-negotiable financial investment is not transferable.
This is also known as non-securitized financial investment. Deposit schemes offered by the
post offices, companies, banks, and non-banking financial companies are of this category. The
tax-sheltered schemes such as public provident fund, national savings certificate and national
savings scheme are also non-securitized financial investments. Mutual fund is another
investment alternative. Within a short span of time several financial institutions and banks have
floated a lot of varieties of mutual funds. The investors with limited funds can invest in the
mutual funds and can have the benefits of the stock market and money market investments as
specified by the particular fund. Real assets like gold, silver, property, arts and antiques always
find a place in the portfolio.
Unit Trust of India is the first mutual fund set up under a separate act, UTI Act in 1963, and
started its operations in 1964 with the issue of units under the scheme US-64. In India, Mutual
Funds must be registered with Securities Exchange Board of India (SEBI), is the regulatory
body for all the mutual funds. The only exception is the UTI, it is a corporation formed under
a separate Act of Parliament. Mutual Funds have both the advantages and disadvantages
compared to direct investing in individual securities. They play an important role in household
finances. The first Mutual Funds scheme was established in Europe in 1774. The first mutual
fund outside the Netherlands was the Foreign & Colonial Government Trust, which was
established in London in 1868. Mutual funds were introduced into the United States in the
1890.
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They became popular during the 1920. These early funds were generally of the closed-end type
with a fixed number of shares which often traded at prices above the value of a portfolio. The
first open-end Mutual Fund with redeemable shares was established on March 21, 1924.
The term investment is very difficult to describe as investors point of view. The process of
investment is always identifying with the consumers expectations and selection of financial
instruments where they want to invest their funds. Generally preferable investment avenues are
shares, debentures, fixed deposits, mutual funds insurance policies, real assets and liquid
financial instruments. By investing their funds in financial instruments, they are quit from the
present consumptions means its quite often their expectation is very high in terms of future
return as compare to present expectations. A number of factors may be affected to investment
decision of individual investors. From the various risk-return opportunities set investor can
select the optimal portfolio for investing their funds in various financial assets.
An attempt has been made in this study tries to identify the perceptual influencing and
motivating factors on individual investors to invest their money in mutual funds. There are lots
of investment opportunities available to an investor from the various investment avenues. Each
of the investment vehicles has their own characteristics. The proverb “Serve all verity of foods
in one plate” suggest to investors to diversify the risk. Diversification refers to the process
whereby investors invest his/her money in the more than one investment vehicles. All the
investors may not have the knowledge about fundamental and technical credentials of any
investment avenues before they decide to invest their money in various investment
opportunities set. Small income earner cannot directly invest their money in the stock market
but they will prefer to invest in less risk investment avenue like mutual funds. The tremendous
growth has shown by the mutual fund industry from the past few decades. The mutual fund
industry plays a vital role in the developing the financial market and economy. Mutual fund
industry is also called as a retail investment shop for small and medium income groups.
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Literature Review
Supply side issues, by which we mean the characteristics of the financial services sector, will
affect the size of the mutual fund Industry. Issues like bank concentration (Nicola & Michele,
2001), breadth of the distribution channels, restrictions from entering securities business (Barth
et. al, 2001), ease of entry into the fund industry like cost of setting up a new fund, time required
to set up a new fund and presence of government supported competitive financial products are
noted in the literature for their contribution to the growth of the industry.
Several demand side factors can be used to explain the size and diversification of mutual fund
industry in a country. Some of these factors include education, literacy, presence of information
sources, industry age etc. At the same time, there are some trading characteristics like
transparency and transaction costs (Chiyachantana, 2004) which also can be used to determine
some of the characteristics of the mutual fund industry.
Müller & Weber, 2010 investigate the consequences of financial literacy in the context of
mutual fund investments. They found that the level of financial literacy is not related to the
performance of the actively managed funds. In contrast, overconfidence might prevent subjects
from investing passively. A positive relation was found between the belief of being better than
average in identifying superior investments and the likelihood of buying an active fund, thus
confirming this notion. Also, better-than-average thinking is positively correlated with
financial expertise.
Consistent with the notion that investors take more care with making their investments initially
than with monitoring subsequently, the sensitivity of aggregate outflows to performance is
quite a bit lower than that of inflows. Investor outflows increase at a faster rate when
performance declines in the region of below average fund performance than they decrease
when fund performance improves in the region of above-average performance. Retail and
institutional investors behave comparably in this regard. Performance of a mutual fund matters
a great deal more while investors decide whether to invest rather than whether to redeem.
Nevertheless, several investor types behave in an inconsistent manner with respect to the
aspects of performance they consider important. Specifically, independently advised investors
react to the non-alpha portion of performance when buying funds but not when selling them,
while insurance companies do the opposite. The paper suggests that from the perspective of
regulators the best active fund investors are those who induce the most intense competition for
superior performance among fund managers, i.e., those whose reaction to fund performance is
especially strong.
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Zechner , 2011 study the interface between intermediaries and portfolio managers (including
mutual funds) and investors. There are often multiple financial advisors between portfolio
managers and investors. Portfolio managers pay significant “kickbacks” to compensate
advisors for price discrimination or marketing. Kickback payments increase portfolio manager
fees and reduce returns. Portfolio manager competition reduces kickbacks, but increases
independent advisory services. The study focuses on financial intermediaries as distinct agents
and the economic roles they play. Their analysis of financial intermediation also provides six
major findings:
1. Financial advisers facilitate small investor use of actively managed funds by minimizing
information search costs. With rational investors and competitive advisors, fund management
fees are reduced. Advisers that do not receive kickbacks increase investor welfare.
2. Mutual funds make widespread use of kickbacks to compensate financial advisors. With
sophisticated investors, fund kickbacks subsidize advice costs for smaller investors. With
unsophisticated investors, kickbacks support aggressive advisor marketing. When advisors
receive fund kickbacks, investors use additional advisory services.
3. Mutual fund payments of kickbacks are associated with higher management fees and lower
fund performance. When investors are sophisticated, kickbacks affect only high net worth
investors. When investors are unsophisticated, all investors are negatively impacted.
4. Mutual fund distribution channels impact fund performance. Indirect channels distribute
underperforming funds. Direct and indirect channels distribute actively managed funds with
equal or higher performance than passive funds.
5. Kickbacks are reduced by competition among actively managed funds. Increasing fund
competition generates additional advisory services.
6. Lastly, fund investors would benefit from better disclosure of kickbacks. Kickbacks should
be paid with transparent cash payments, rather than for specific sales related activities.
All the above 6 points describe how benefits are of investing in Mutual Fund.
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International history of mutual funds
The Boston security executive pool their money together in 1924 to create a first
mutual fund they had no idea how popular Mutual Funds would become the idea of
putting money together for investing purpose is started in Europe in mid 1888s the
first pole for in US was created in 1893 for the faculty and staff of Harvard
University on March 21st 1924 the first official mutual fund was born it was Called
Massachusetts investors trust.
After one year the Massachusetts impress her trust groove $50,000 in a set in 1924 to
$392000 dollar in asset with around 200 shareholders in contrast there are over
10,000 mutual funds in US today totaling around 7 trillion (with approximately 83
million individual investors) according to investment company Institute stock
market crash of 1929 slow the growth of mutual funds in response to stock market
crash Congress passed ask the securities act of 1934. these laws require that a phone
be registered with the shake and provide prospective investors with prospectus the
US securities and exchange Commission help create the investment Company Act
of 1940 which provide the guidelines that all mutual fund comply with today.
With renewed confidence in the stock market mutual fund begins to Blossom by the
end of 1960 is there around 270 Pounds with 48 billion in assets in 1976 John C
Bogle open the first retail index fund call first index investment trust it is now the
called Vanguard 500 index fund and in November 2008 we can the largest Mutual
Fund Growth was individual retirement account(IRA)Provisions made in 1981,
allowing individuals(including those already in corporate pension plans) to
contribute $2,000 a year. Mutual funds are now people known for ease of use,
liquidity and unique diversification.
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o MUTUAL FUNDS IN INDIA
In India mutual funds are divided in to balanced funds, Income fund, Growth funds, Sector
funds, etc. Equity funds mainly consist of common shares and stocks of companies listed in
the stock exchanges. They are considered risky but are likely to give higher return in the longer
run. Fixed income funds: Also known as low-risk funds, these funds mainly invest in
government and corporate securities (debentures) with fixed number of returns, which are
generally moderate. Balanced funds are basically a combination of the bonds and stocks, which
involves moderate to little risk. Hybrid funds include other investment classes in portfolio like
gold apart from equity and debt. Mutual funds have advantages compared to direct investing
in individual securities. It includes increased diversification, professional investment
management, daily liquidity, ability to participate in investments that can be available only to
larger investors, convenience and service, government oversight and ease of comparison.
Mutual Funds have disadvantages as well, such as fees, less control over timing of recognition
of gains, less predictable income and no opportunity to customize.
SEBI (Security Exchange Board of India) Guidelines Pertaining to Mutual Funds: SEBI is the
regulatory authority of MFs. SEBI has the broad guidelines regarding to mutual funds such as:
MFs should be formed as a Trust under Indian Trust Act and to be operated by Asset
Management Companies (AMCs). MFs need to set up a Board of Trustees and Trustee
Companies. They should also have their Board of Directors. The net worth of AMCs should be
at least Rs. 5 cr. AMCs and Trustees of Mutual funds should be two separate and distinct legal
entities. The AMC or any of its companies cannot act as managers for the any other fund.
AMCs are to get the approval of SEBI for its Articles and Memorandum of Association. All
MF schemes should be registered with SEBI. Mutual Funds should distribute minimum of 90%
of their profits among the investors. There are more guidelines also that govern investment
strategy, disclosure norms and advertising code for mutual funds
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o HOW MUTUAL FUNDS WORK?
A mutual fund scheme, as many of you may know, pools money from multiple investors and
invests the collected money in shares of listed companies, government bonds, corporate bonds,
short-term money-market instruments, other securities or assets, or a combination of these
investments. The type of securities selected for the portfolio is in accordance with the
investment objectives as disclosed in offer document. Therefore, equity mutual fund scheme
invests predominantly in a portfolio of stocks, while a debt fund will invest the significant
portion of its assets in bonds. Within the asset class itself, the investment objective should be
further narrowed down. Thus, within the broader equity mutual fund category, there can be
Large-cap Funds, Midcap Funds, etc., that are focused on a specific market capitalization of
stocks. Based on the investment style, there can be Value Funds or Focused Equity Funds as
well. A fund manager manages the investments in a mutual fund. There is more than one fund
manager, based on the discretion of the AMC. The fund managers manage the fund on a day-
to-day basis, deciding when to buy and when to sell investments according to the investment
objectives of the fund. The Mutual Fund collects money from us and other investors and allots
units. This is similar to buying shares of a company. In Mutual Funds, the price of each fund
unit is known as the Net Asset Value. The assets are invested in a set of stocks or bonds, that
form the portfolio of that fund. The fund manager decides the portfolio allocation depending
on the investment objective of the scheme.
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o What is Mutual Fund?
Maya always had money to invest, but she does not have the time or knowledge to invest it in
individual stocks. A colleague at work tells her that mutual funds are a way to participate in
the long-term growth of stock values without the hassle of buying and selling individual stocks.
Mutual funds let the small investor gain the expertise that comes with professional management
of their money! So, what is a mutual fund anyway? “Mutual fund pools money from many
individual investors, then the fund manager invests it in a portfolio or basket of stocks,
bonds, and government securities.” A well-diversified fund may have a portfolio of hundreds
of different stocks and bond issues. When the prices of these securities go up, the investors
make money.
o Buying Mutual Funds
Shares in a mutual fund can be purchased from a broker, an adviser, or directly from the fund
itself. Maya learns that brokers and advisers charge a sales commission or load on some funds
which takes away a percentage of her money and reduces what will be invested in the fund.
Sales commissions charged at the time of purchase are called a front-end load. A back-end load
on the other hand, takes the sales commission out of the proceeds check when the shares are
sold. Maya likes to invest directly with the funds themselves, and buys only no-load funds. She
doesn't like to pay those commissions! Mutual fund transactions are different though; they
aren't executed until after the end of the business day when the funds' value can be calculated
at closing prices. This means the price of mutual fund only changes once per day. So, when
Maya decides to invest $5,000 in the Big Green Fund at 10 a.m., her buy will not actually occur
until after 4 p.m. Maya won't know the price she bought in for, or how many shares her $5,000
bought until her transaction is actually processed at the new price.
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o Net Asset Value
Maya won't know the new price until the Big Green Fund calculates its net asset value (NAV).
After the exchanges close on each business day, net asset value of mutual funds can be
calculated. The NAV calculation looks a lot like the balance sheet of a business. The fund
assets, which are its investments in stocks, bonds and government securities, are calculated
with the end of day prices. From that the fund liabilities and expenses are deducted. The
difference is what the fund’s investor, like Maya, own
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Process Of Mutual Fund Working:
Above are pictorial representation of How Mutual Fund works. With the below example we
can understand it in better way.
Let's say SBI Mutual Fund launches a new scheme called SBI Top 20 Fund. Let's assume that,
the scheme collects Rs. 1 crore from 100 investors who invested Rs. 1 lakh each. The fund
house issues the units at an NAV of Rs. 10, it will allot 10,000 units (Investment/NAV) to each
investor. So, the total number of units allocated by the fund house is 10 lakhs.
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The SBI Top 20 Fund needs to follow its objective to invest over 20 stocks. The fund manager
picks the top 20 stocks he believes that will deliver good returns. Then he decides to invest an
equal amount in each stock. The scheme has total corpus (also known as Assets under
Management – AUM) of Rs 1 crore, it will invest approximately Rs. 5 lakhs in each stock.
These stocks form the portfolio of the mutual fund scheme. Now, the fund manager invests a
high proportion in stocks that are expected to deliver better returns over the long term. The
fund also maintains a cash balance to deal with redemptions.
After a few months, there is no change in the portfolio holding (stocks present in the portfolio)
or the number of investors. As the price of the stocks moved up, the total value of stocks in the
portfolio grows to Rs. 1.2 crore. If the unit of the fund remains unchanged at 10,000 units, the
NAV of each unit is now Rs. 12 (Rs. 1.2 crore / 10 lakh units).
For the investors, their investment would have grown to Rs. 1.2 lakh (10,000 units * Rs. 12
NAV). This translates in to a gain of Rs. 20,000 (Rs. 1.2 lakh – Rs. 1 lakh). In percentage terms,
the gains work out to 20% or in other words an absolute return of 20% (Rs. 20,000/Rs.1 lakh)
Redemption.
Some investors chose to redeem or sell their investments. Overall, 50,000 units were redeemed.
In value terms, this resulted in an outflow of Rs. 6 lakhs. The AUM of the fund falls to Rs. 1.14
crore and the total number of units comes down to 9.5 lakh. Thus, as you can see, the NAV
remains at Rs. 12/unit.
To deal with this redemption, the fund manager will first opt to pay back the investors from the
cash balance in the portfolio. He may also choose to sell some shares of some stocks, if needed.
However, most fund managers would only sell their shareholdings of a stock if they do not see
any further potential of the company to move higher.
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o Fall in NAV
Now, assume the price of the stocks in the portfolio headed lower. From Rs. 1.14 crore, the
value of the portfolio falls to Rs. 1.05 crore. The NAV is now Rs. 11.05/unit (Rs. 1.05/95 lakh
units). Another investor invests an additional Rs. 1 lakh in the scheme. This time for the same
amount of investment he gets just 9047.619 units. The value of the portfolio rises to Rs. 1.06
crore with this investment. The total number of units under the scheme grows by an additional
9047.619 units.
We have covered the working of mutual funds in a very simplistic way to ease understanding.
The reality is, hundreds of investors may buy or redeem units on a daily basis. However, the
basic working remains the same.
o Systematic Investment Plan
Simply put, a SIP refers to Systematic Investment Plan, which is mode of investing in mutual
funds in a systematic and regular manner. This method of investing is similar to investing in a
recurring deposit (RD) in a bank. Just as a fixed sum of money is deducted from your bank
savings account to invest in your recurring deposit account, your monthly investment through
SIP is deducted from your linked bank account and invested in the selected mutual fund
scheme.
Unlike recurring deposits that pay a fixed interest, the returns from mutual funds are dependent
on the market value of the securities included in the portfolio. It is represented by the NAV of
the mutual fund scheme. Therefore, the NAV keeps fluctuating on a daily basis, which is more
prominent under equity mutual funds. A SIP is merely a method of investing. The primary
objective of a SIP is to make lower average cost of investment as much as possible, in order to
generate maximum returns.
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Structure Of Mutual Fund
The Fund Sponsor
•Any person or corporate body that establishes the Fund and registers it with SEBI
•Forms a Trust and appoints a Board of Trustees
•Appoints Custodian AMC either directly or through Trust, in accordance with SEBI
regulations
•SEBI regulations define that a sponsor must contribute at least 40 to the net worth of AMC
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Trustees-
•Created through document called Trust Deed executed by Fund Sponsor and registered with
SEBI
•Mutual fund may be managed by a Board of Trustees i e a body of individuals or a Trust
Company i.e., a corporate body
•Protector of unit holders’ interests
•2 /3 of the trustees shall be independent persons and shall not be associated with the sponsors
Rights and Roles of Trustees‐
• Approve each scheme floated by AMC, right to request necessary information from AMC.
• May take corrective action if they believe that conduct of fund's business is not in
accordance with SEBI Regulations
• Right to dismiss AMC
• Ensure that, any shortfall in net worth of the AMC is made up of
Fund Managers (The Asset Management Company)

Has to discharge mainly three functions as under
1.Taking investment decisions and making investments of the funds through market
dealer/brokers in the secondary market securities or directly in the primary capital market or
money market instruments.
2.Realize fund position by taking account of all receivables and realizations, moving corporate
actions involving declaration of dividends, etc. to compensate investors for their investments
in units.
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3.Maintaining proper accounting and information for pricing the units and arriving at net asset
value (the information about the listed schemes and the transactions of units in the secondary
market An AMC has to give feedback to the trustees about its fund management operations
and has to maintain a perfect information system.
Custodians
• A custodian’s role is safe keeping of physical securities and also keeping a tab on the
corporate. actions like rights, bonus and dividends declared by the companies in which the fund
has invested.
• Appointed by the Board of Trustees.
• Mutual funds run by the subsidiaries of the nationalized banks have their respective sponsor
banks as custodians like Canara bank, SBI, PNB, etc.
• Foreign banks with higher degree of automation in handling the securities have assumed the
role of custodians for mutual funds.
Responsibility of Custodians
‐Receipt and delivery of securities
‐Holding of securities
‐Collecting income
‐Holding and processing cost
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REGULATORY STRUCTURE OF MUTUAL FUNDS IN INDIA
The structure of mutual fund in India is governed by the SEBI Regulations, 1996. These
regulations make it mandatory for mutual funds to have a three-tier structure SPONSER-
TRUSTEE-ASSET MANAGEMENT COMPANY (AMC). The sponsor is the promoters of
the mutual fund and appoint the AMC for managing the investment portfolio. The AMC is the
business face of the mutual fund. as it manages all the affairs of the mutual fund. The mutual
fund and the AMC have to be registered with SEBI.
Mutual Funds can be structured in the following ways:
Company form in which investors hold shares of the mutual fund. In this structure management
of the fund in the hands of an elected board, which in turn appoints investment managers to
manage the fund. Trust from, in which the investors are held by the trust, on behalf of the
investors The appoints investment managers and monitors their functioning in the interest of
the investors.
The company form of organization is very popular in the United States in India mutual funds
are organized as trusts. The trust is created by the sponsors who is actually the my interested
in creating the mutual fund business. The trust is either managed by a Board of trustees or by
a trustee company, formed for this purpose. The investors funds are held by the trust.
Though the trust is the mutual fund, the AMC Is its operational face. The AMC is the first
functionary to be appointed and is involved in the appointment of all the other functionaries
The AMC strictures the mutual fund products, markets them and mobilizes the funds and
services the investors. It seeks the services of the functionaries in carrying out these functions.
All the functionaries are required to the trustees, who lay down the ground rules and monitor
them working.
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REGULATORY FRAMEWORK
Regulatory jurisdiction of SEBI:
SEBI is the apex regulatory of capital markets. SEBI has enacted the SEBI (mutual fund)
Regulations, 1996, which provides the scope of the regulation of the mutual fund in India. All
Mutual funds are required to be mandatorily registered with SEBI. The structure and formation
of mutual funds, appointment of key functionaries, operation of the mutual funds, accounting
and disclosure norms, rights and obligations of functionaries and Investors, investment
restrictions compliance and penalties are all defined under the SEBI regulations. Mutual funds
have to send half yearly compliance reports to SEBI, and provide all information about their
operations.
Regulatory jurisdiction of RBI:

RBI is the monetary authority of the country and is also the regulatory of the banking system.
Earlier bank sponsored mutual funds were under the dual regulatory control of RBI and SEBI.
These provisions are no longer in vogue. SEBI is the regulator of all mutual funds. The present
position is that the RBI is involved with the mutual fund industry, only to the limited extent of
being the regulator of the sponsors of bank sponsored mutual funds.
Role of Ministry of Finance in Mutual Fund:

The Finance Ministry is the supervisor of both the RBI and SEBI The Ministry of Finance is
also the appellate authority under SEBI Regulations Aggrieved parties can make appeals to the
Ministry of Finance on the SEBI rulings relating to the mutual fund.
Role of Companies Act in Mutual Fund:

The AMC and the Trustee Company may be structured as limited companies, which may come
under the regulatory purview of the Company Law Board (CLB). The provisions of the
Companies Act, 1956 is applicable to these company forms of organizations. The Company
Law Board is the apex regulatory authority for companies. Any grievance against the AMC or
the trustee company can be addressed to the Company Law Board for redressal.
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Role of Stock Exchanges:
If a mutual fund is listed its schemes on stock exchanges, such listings are subject to the listing
regulation of stock exchanges. Mutual funds have to sign the listing agreement and abide by
its provisions, which primarily deal with periodic notifications and disclosure of information
that may impact the trading of listed units.
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❖ EVOLUTION OF INDIAN MUTUAL FUND INDUSTRY
The formation of Unit Trust of India marked the evolution of the Indian Mutual Fund industry
in year 1963. That time the primary objective was to attract the investors and it was made
possible through the limited efforts of the Government of India and the Reserve Bank of India.
The history of Mutual Fund industry in India can be better understood by following phases:
1) Establishment and Growth of Unit Trust of India - 1964-87 Unit Trust of India enjoyed a
complete monopoly when it was established in the year 1963 by an act of Parliament. UTI was
set up by RBI and continued to operate under the regulatory control of RBI until they de-linked
in 1978 and the entire control was transferred to the hands of Industrial Development Bank of
India (IDBI). IN 1964 UTI launched their first scheme, as Unit Scheme 1964 (US-64), that
scheme attracted the largest number of investors in any single investment scheme over the
years. Then UTI launched more interesting schemes in 1970s and 80s to complete the needs of
different investors in easy way. It launched ULIP in 1971, and they launch six more schemes
between 1981-84, Children's Gift Growth Fund and India Fund (India's first offshore fund) in
1986, Master share is India’s first equity diversified scheme launched in 1987 and Monthly
Income Schemes offering assured returns during 1990s. By the end of 1987, UTI's assets under
management grew ten times to Rs 6700 crore.
2) Entry of Public Sector Funds - 1987-1993 The Indian mutual fund industry witnessed many
players of public sector entering the market in the year 1987. In November 1987, SBI Mutual
Fund of the State Bank of India became the first non-UTI mutual fund in India. SBI Mutual
Fund was later followed by Can bank Mutual Fund, LIC Mutual Fund, Indian Bank Mutual
Fund, Bank of India Mutual Fund, GIC Mutual Fund and PNB Mutual Fund. By 1993, the
assets under management of the industry increased seven times to Rs. 47,000crore. The UTI
remained to be the leader with about 80% of market share.
27
3) Emergence of Private Sector Funds - 1993-96
The permission has been given to private sector funds including foreign fund management
companies. Most of companies are entering through joint ventures with help of Indian
promoters to enter the mutual fund industry in 1993, it has provided a wide range of choice to
investors and more competition in the industry. Private funds introduced innovative and
attractive products, investment techniques and investor-servicing technology. By 1994-96,
about 12 private sector funds had launched their schemes.
4) Growth and SEBI Regulation - 1996-2004
The mutual fund industry witnessed the fast growth and stricter regulation from the SEBI after
the year 1996. The mobilization of funds and the number of players operating in the industry
reached new level as investors started showing more interest in the Mutual Funds. Investors'
interests were safeguarded by SEBI and the Government offered tax benefits to the investors
to encourage them. Mutual Funds Regulations, 1996 was introduced by SEBI that set the
uniform standards for all mutual funds in India. SEBI and AMFI launched Various Investor
Awareness Programs during this phase, with a single objective to educate investors and make
them informed about the mutual fund industry.
5) Growth and Consolidation - 2004
The MF industry is also witnessed several mergers and acquisitions recently, for e.g.,
acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun F&C MF and PNB MF
by Principal Mutual Fund. Simultaneously, more international mutual fund players have
entered India like Fidelity, Franklin Templeton etc. There were total of 29 funds as at the end
of March 2006. This is a continuing phase of growth of the industry through consolidation and
entry of a new international and private sector players. Indian mutual fund industry reached
Rs. 1,50536crore by March 2004. It is estimated that by 2011 March-end, the total assets of all
scheduled commercial banks should be Rs 4,90,000 crore. The annual composite rate of growth
is expected 13.4% in the rest of the decade. In the last 5 years there is an annual growth rate of
9%. According to that current growth rate, in year 2010, Mutual fund India assets are been
doubled.
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6)Mutual Funds History: Phase of Steady Development and Growth (Since May
2014):
Recognizing the lack of penetration of mutual funds in India, especially in the tier II and tier
III cities, SEBI launched numerous progressive measures in September 2012. The idea behind
these measures was to bring more transparency and security for the interest of the stakeholders.
This was SEBI’s idea to ‘re-energize’ the Indian MF Industry and boost the overall penetration
of mutual funds in India.
The measures bore fruit in the due course by countering the negative trend that was set because
of the global financial crisis. The situation improved considerably after the new government
took charge at the central. Since May ’14, the Indian MF industry has experienced a consistent
inflow and rise in the overall AUM as well as the total number of investor accounts (portfolio).
Currently, all the Asset Management Companies in India manage a combined worth of around
Rs. 23 lac crores of assets. Though this number looks attractive, we still have to go a long way
in order to match the west.
It is estimated that Indians save approximately Rs. 20-30 lakh crore annually. The Indian
mutual fund industry can grow immensely if Indians started parking a higher percentage of
their savings in MFs. Observers say that Indians have begun shifting a part of their savings
from physical assets like gold and land to financial instruments like bonds and silver. However,
the AMFI and the government need to encourage Indians even more for investments in mutual
funds.
29
FACTORS CONSIDERING WHILE SELECTING MF CATEGORY:
1) Investment Objective – Investment objective refers to an investor’s financial goal which

they aim to accomplish with the mutual fund investment. The investment objective can be any
short-term or long-term financial aspiration of the investor – buying a house/car, financing
children’s higher education, going on a vacation, retirement, etc.
2) Time Horizon – Time horizon refers to the time period for which an investor wishes to
keep his/her money invested in a mutual fund scheme. It can be either minimum 1 day or
maximum more than 5 years. Different fund categories work best for the different time
horizons. This is because some funds invest in short dated debt and others invest in longer
dated debt. Equity funds should be chosen ideally if the investment horizon is more than 5
years.
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Time Horizon Mutual Fund
1Day -3months Liquid Funds
3Month- 1Year Ultra-short Duration Fund
1Year-3Year Short Duration Fund

3Year- 5Year Balanced Fund
5Year and above Equity Fund
3) Risk Tolerance –
Risk tolerance refers to the amount of risk that investors are willing to take with their invested
money. In 2015 SEBI made it mandatory for all mutual fund houses to display a risk meter
which consists of 5 levels of risk associated with the invested principal amount. These 5 risk
levels are – low, moderately low, moderate, moderately high, and very high.
The following table shows different fund categories for different time horizons:
The fund categories that are most suitable to different risk levels and time horizons are shown
below in table:
Time Horizon/Risk Low Risk Medium Risk High Risk

Short Duration (Up Liquid funds, Ultra Short-Duration Arbitrage Funds
to 3 Years) Short-Duration Funds
Funds
Medium Duration (3 Short Duration Balanced Advantage Equity Hybrid Funds
Years – 5 Years) Funds Funds
Long Duration Large Cap Funds Multicap Funds Small Cap Funds,
(5Years and above) Mid Cap Funds
31
FACTORS CONSIDERING WHILE SELECTING MF SCHEME
a) Performance against Benchmark
A benchmark index of a mutual fund scheme is a standard against which its performance and
stock allocation are to compare. It guides the investment philosophy of the scheme. Thus, the
asset allocation of a benchmark index should match the investment objective of that scheme.
For instance, the benchmark index of a large cap mutual fund should be the index of large cap
stocks and the benchmark of a mutual fund focuses on banking stocks that should be a banking
index.
b) Performance against Category
Another factor which is equally important to assess while selecting a mutual fund scheme is
its performance in comparison to its active category group. This helps in getting a holistic
understanding of the fund’s performance. This comparison should be only among the same
type of mutual fund schemes. For instance, a large cap equity mutual fund can only be
compared with other large cap mutual funds and not against mid cap low cap funds or debt
funds. Performance Against Benchmark Performance Against Category Performance
Consistency Fund Managers Experience AMC Track Record Assets Under Management
Expense Ratio
c) Performance Consistency
A good mutual fund is one which is able to generate good returns for its investors continuously
over a period of time. The fund should be capable of providing consistent returns in both
bearish and bullish periods of the stock market.
32
d) Fund Manager’s Experience
Another important factor to be considered while selecting a mutual fund is the performance
and experience of fund manager. For this, an investor should look at the fund manager’s
experience with the fund in question and with other funds currently managed or managed in
the past by him/her.
e) AMC Track Record
An Asset Management Company (AMC), also known as fund house, this is the company
which manages a scheme for mutual fund. For example, SBI Mutual Fund is the name of the
AMC which manages schemes like SBI Equity, SBI Top 100 or SBI Small Cap Fund. Many
decisions are made at AMC level by the Chief Investment Officer (CIO) of the AMC. A poorly
selected stock is often present in several schemes owned by an AMC, because the selection has
been made at AMC level. Thus, it is important to check the track record of an AMC while
selecting a mutual fund scheme.
f) Assets Under Management (AUM)
It refers to the value of assets under its management. In other words, it simply means how
many subscriptions the scheme has received. In the equity category, especially in small cap
funds, a large AUM can make it hard for the fund to enter and exit companies. On the other
hand, larger sizes of AUM are favorable in case of liquid and short-term debt funds as it makes
the fund less vulnerable to redemptions made by large investors.
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g) Expense Ratio
The expense ratio of a fund reflects the fee charged by AMC for the administration,
management, promotion and a mutual fund distribution. All expenses incurred in the running
of the fund are included in this table. This figure is capped at 2.25% of the total fund assets by
capital markets regulator SEBI (Securities and Exchange Board of India). Direct plans of
mutual fund schemes have lower expense ratio than the regular plans because no distribution
commission is paid in the case of direct plans. In general, lower the expense ratio, the higher
are the net returns of a mutual fund scheme.
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Avoiding Common Pitfalls
Past Performance
A mutual funds or ETF’s past performance is not as important as one might think.
Advertisements, rankings, and ratings often emphasize how well a mutual fund or ETF has
performed in the past. But studies show that the future is often different. This year’s number
one mutual fund or ETF can easily become next year’s below average mutual fund or ETF. For
mutual funds and ETFs, be sure to find out how long the fund has been in existence. Newly
created or small mutual funds or ETFs sometimes have excellent short-term performance
records. Because newly created mutual funds and ETFs may invest in only a small number of
stocks, a few successful stocks can have a large impact on their performance. But as these
mutual funds and ETFs grow larger and increase the number of stocks they own; each stock
has less impact on performance. This may make it more difficult to sustain initial results.
While past performance does not necessarily predict future returns, it can tell an investor how
volatile (or stable) a mutual fund or ETF has been over a period of time. Generally, the more
volatile a fund, the higher the investment risk. If you will need your money to meet a financial
goal in the near-term, you probably can’t afford the risk of investing in a fund with a volatile
history because you will not have enough time to ride out any declines in the stock market. For
index mutual funds and index ETFs, remember that these funds are designed to track a
particular market index and their past performance is related to how well that market index did.
Looking Beyond a Mutual Fund or ETF Name
Don’t assume that a mutual fund called the “ZYX Stock Fund” invests only in stocks or that
the “ICICI Prudential Gold ETF” invests only in the securities of companies headquartered on
the planet Mars. The SEC generally requires that any mutual fund or ETF with a name
suggesting that it focuses on a particular type of investment must invest at least 80% of its
assets in the type of investment suggested by its name. But mutual funds and ETFs can still
invest up to one-fifth of their holdings in other types of securities—including securities that a
particular investor might consider too risky or perhaps not aggressive enough.
35
Bank Products Versus Mutual Funds
Many banks now sell mutual funds, some of which carry the bank’s name. But mutual funds
sold in banks, including money market funds, are not bank deposits. As a result, they are not
federally insured by the Federal Deposit Insurance Corporation (FDIC).
Sources of Information
■ Prospectus and Summary Prospectus
Mutual funds must provide a copy of the fund’s prospectus to shareholders after they purchase
shares, but investors can— and should—request and read the mutual fund’s prospectus before
making an investment decision. There are two kinds of prospectuses: (1) the statutory
prospectus; and (2) the summary prospectus. The statutory prospectus is the traditional, long-
form prospectus with which most mutual fund investors are familiar. The summary prospectus,
which is used by many mutual funds, is just a few pages long and contains key information
about a mutual fund. The SEC specifies the kinds of information that must be included in
mutual fund prospectuses and requires mutual funds to present the information in a standard
format so that investors can readily compare different mutual funds.
The same key information required in the summary prospectus is required to be in the
beginning of the statutory prospectus. It appears in the following standardized order:
(1) investment objectives/goals;
(2) fee table;
(3) investments, risks, and performance;
(4) management—investment advisers and portfolio managers;
(5) purchase and sale of fund shares;
(6) tax information; and
(7) financial intermediary compensation.
Investors can also find more detailed information in the statutory prospectus, including
financial highlights information. An ETF will also have a prospectus, and some ETFs may have
a summary prospectus, both of which are subject to the same legal requirements as mutual fund
prospectuses and summary prospectuses.
36
All investors who purchase creation units (i.e., Authorized Participants) receive a prospectus.
Some broker-dealers also deliver a prospectus to secondary market purchasers. All ETFs are
required to deliver a prospectus upon request and without charge, and the prospectus will
usually be available on the ETF’s website. While they may seem daunting at first, mutual fund
and ETF prospectuses contain valuable information. Here’s some of what is included in mutual
fund and ETF prospectuses:
• Investment Objective—The prospectus will describe the mutual funds or ETF’s investment
objectives or goals. A fund may also identify its type or category (e.g., that it is a money market
fund or balanced fund).
• Fee Table—This table describes the mutual funds or ETF’s fees and expenses, which include
the shareholder fees and annual fund operating expenses (discussed on pages 26-32). The fee
table includes an example that will help investors compare costs among different mutual funds
or ETFs by showing them the costs associated with investing a hypothetical $10,000 over a 1-
, 3-, 5-, and 10-year period.
• Key Risks—The prospectus will discuss the mutual funds or ETF’s principal investment risks.
• Financial Highlights Information—This section, which generally appears towards the back
of the prospectus, contains audited data concerning the mutual funds or ETF’s financial
performance for each of the past 5 years. Here an investor will find net asset values (for both
the beginning and end of each period), total returns, and various ratios, including the ratio of
expenses to average net assets, the ratio of net income to average net assets, and the portfolio
turnover rate.
37
How to Choose the Best Mutual Fund Scheme?
Identifying Goals and Risk Tolerance-
Before investing in any fund, you must first determine your investment objectives. Is it more
important to you to make long-term financial gains or to make present income? Will the funds
be used to pay for college or to save for a long-awaited retirement? The first step in narrowing
down the universe of over 8,000 mutual funds offered to investors is to choose a goal. Personal
risk tolerance should also be considered. Are you willing to accept large swings in your
portfolio's value? Is it better to make a more conservative investment? Because risk and reward
are directly proportionate, you must weigh your desire for profits against your risk tolerance.
Style and Fund Type-

Capital appreciation is the primary purpose of growth funds. A long-term capital appreciation
fund may be an excellent choice if you want to invest for a long-term need and can manage a
moderate amount of risk and volatility. Because these funds often invest a large portion of their
assets in ordinary stocks, they are considered risky. They have the potential for greater profits
over time because of the increased level of risk. The holding period for this type of mutual fund
should be at least five years.
The majority of growth and capital appreciation funds do not pay dividends. If you require
immediate income from your investment portfolio, an income fund may be a better option.
These funds often invest in financial assets that pay interest on a regular basis, such as bonds
and other debt instruments. Two of the most typical holdings in an income fund are government
bonds and corporate debt.
Bond funds frequently limit their holdings to a specific type of bond. Funds can also be
classified according to their time horizons, such as short, medium, or long term. These funds
often have significantly less volatility, depending on the type of bonds in the portfolio. Bond
funds often have a low or negative correlation with the stock market. You can, therefore, use
them to diversify the holdings in your stock portfolio.
38
However, bond funds carry risk despite their lower volatility. These include:
• Interest rate risk is the sensitivity of bond prices to changes in interest rates. When
interest rates go up, bond prices go down.
• Credit risk is the possibility that an issuer could have its credit rating lowered. This risk
adversely impacts the price of the bonds.
• Default risk is the possibility that the bond issuer defaults on its debt obligations.
• Prepayment risk is the risk of the bondholder paying off the bond principal early to take
advantage of reissuing its debt at a lower interest rate. Investors are likely to be unable
to reinvest and receive the same interest rate.
Fees And Load Charges-
Fees charged to investors are how mutual fund companies make money. Before you make a
purchase, it's critical to understand the many sorts of costs that come with it.
A load is a sales fee charged by some mutual funds. It will be charged either at the time of
purchase or when the investment is sold. When you buy shares in the fund, you pay a front-end
load fee, which is deducted from your initial investment, and you pay a back-end load fee when
you sell your shares in the fund. The back-end load typically applies if the shares are sold
before a set time, usually five to ten years from purchase. This charge is intended to deter
investors from buying and selling too often. The fee is the highest for the first year you hold
the shares, then dwindles the longer you keep them.
Front-end loaded shares are identified as Class A shares, while back-end loaded shares are
called Class B shares.
Both front-end and back-end loaded funds typically charge 3% to 6% of the total amount
invested or distributed, but this figure can be as much as 8.5% by law. The purpose is to
discourage turnover and cover administrative charges associated with the investment.
Depending on the mutual fund, the fees may go to the broker who sells the mutual fund or to
the fund itself, which may result in lower administration fees later on.
39
There is also a third type of fee, called a level-load fee. The level load is an annual charge
amount deducted from assets in the fund. Class C shares carry this sort of charge. No-load
funds do not charge a load fee. However, the other charges in a no-load fund, such as the
management expense ratio, may be very high.
Other funds charge 12b-1 fees, which are baked into the share price and are used by the fund
for promotions, sales, and other activities related to the distribution of fund shares. These fees
come off the reported share price at a predetermined point in time. As a result, investors may
not be aware of the fee at all. The 12b-1 fees can be, by law, as much as 0.75% of a fund's
average annual assets under management.
Passive vs. Active Management-
Decide whether you want a mutual fund that is actively managed or one that is passively
managed. Portfolio managers in actively managed funds make decisions on which securities
and assets to include in the fund. When making investment selections, managers conduct
extensive research on assets and examine sectors, company fundamentals, economic trends,
and macroeconomic issues.
Depending on the type of fund, active funds aim to outperform a benchmark index. Fees for
active funds are frequently higher. The expense ratio might range from 0.6 to 1.5 percent.
Index funds are passively managed funds that attempt to monitor and copy the performance of
a benchmark index. Fees are generally lower than those charged by actively managed funds,
with some as low as 0.15 percent cost ratios. Unless the composition of the benchmark index
changes, passive funds do not move their assets very often. The fund's costs are reduced as a
result of the low turnover. Thousands of holdings are possible in passively managed funds,
resulting in an extremely well-diversified fund. Passively managed funds do not generate as
much taxable revenue as actively managed funds because they do not trade as much. For non-
tax-advantaged accounts, this can be a critical concern.
The question of whether actively managed funds are worth the additional fees they charge is
still being debated. In March 2018, the S&P Indices Versus Active (SPIVA) report for 2017
was released, and it revealed some interesting findings. Over the last five and 15 years, only
about 16% of managers in any category of actively managed U.S. mutual funds have
outperformed their respective benchmarks. Most index funds, on the other hand, do not
outperform the index. Because of their minimal expenses, an index fund's return is often
slightly lower than the index's performance. Despite this, the inability of actively managed
funds to outperform their indices has made index funds extremely popular among investors in
recent years.
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Evaluating Managers and Past Results-
As with all investments, it's important to research a fund's past results. To that end, the
following is a list of questions that prospective investors should ask themselves when reviewing
a fund's track record:
• Did the fund manager deliver results that were consistent with general market returns?
• Was the fund more volatile than the major indexes?
• Was there unusually high turnover that might impose costs and tax liabilities on
investors?
The answers to these questions will give your insight into how the portfolio manager
performs under certain conditions, and illustrate the fund's historical trend in terms of
turnover and return.
Before buying into a fund, it makes sense to review the investment literature. The
fund's prospectus should give you some idea of the prospects for the fund and its holdings
in the years ahead. There should also be a discussion of the general industry and market
trends that may affect the fund's performance.
Size of the Fund-
In most cases, a fund's size has no bearing on its ability to accomplish its investing objectives.
However, there are situations when a fund becomes excessively large. Fidelity's Magellan Fund
is an excellent example. The fund's assets surpassed RS 10000 crores in 1999, forcing it to
modify its management procedure to accommodate the enormous daily investment inflows.
Rather than being agile and investing small and mid-cap firms, the fund has moved its focus to
huge growth stocks. As a result, the company's performance worsened.
So, when it comes to size, how big is too huge? There are no hard and fast rules, but managing
RS 10000 crores in assets makes it more difficult for a portfolio manager to run a fund
efficiently.
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History Often Doesn't Repeat
We’ve all heard that ubiquitous warning: “Past performance does not guarantee future results.”
Yet looking at a menu of mutual funds for your 401(k) plan, it’s hard to ignore those that have
crushed the competition in recent years.
Some actively managed funds beat the competition fairly regularly over a long period, but even
the best minds in the business will have bad years.
A study by investment firm Robert W. Baird & Co. looked into this phenomenon. The
company found that even successful fund managers experienced periods of
underperformance lasting two or three years.
Selecting What Really Matters -
Rather of focusing on the recent past, investors should consider elements that influence future
outcomes. In this regard, a lesson from Morningstar, Inc., one of the country's major investment
research firms, might be useful.
Since the 1980s, the firm has given mutual funds a star rating based on risk-adjusted results.
However, research has shown that these scores have little bearing on future achievement.
Morningstar has since implemented a five-point grading system: Process, Performance, People,
Parent, and Price. The organisation considers the fund's investment strategy, the length of its
managers, expense ratios, and other pertinent aspects as part of the new rating system. Each
category's funds are rated as Gold, Silver, Bronze, or Neutral.
The jury is yet out on whether or not this new strategy will outperform the old. In any case, it's
a recognition that historical results alone only tell a small portion of the tale.
If there is one factor that consistently correlates with strong performance, it is fees. Low fees
explain the popularity of index funds, which mirror market indexes at a much lower cost than
actively managed funds. It’s tempting to judge a mutual fund based on recent returns. If you
really want to pick a winner, look at how well it’s poised for future success, not how it did in
the past.
So, selecting a mutual fund may appear to be a difficult undertaking, but it may be made easier
by conducting some research and understanding your goals. You'll have a better chance of
succeeding if you do your homework before choosing a fund.
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❖ Here is a list of Top Mutual Funds that you can invest for good returns in FY 2022:
(The scheme suggested are of my own choice research carefully before investing this is not an
investment advice)
It is Advisable to keep all above points in mind while selecting Mutual fund such as Size of
fund, Fund Managers experience, Past performance to understand how fund is performing,
Benchmark Index to be seen, Expenses such as Entry load exit load etc. Before Investing in
Mutual fund all scheme related documents should be read carefully and then consult again with
Investment advisor for selecting Mutual fund investment.
Axis Blue chip Fund
"When you invest for five years or more, you can expect gains that comfortably beat the
inflation rate as well as returns of fixed income options. But be prepared for ups and downs in
your investment value along the way.
This is a fund that invests in big companies. Compared to those that invest in smaller
companies, such funds tend to fall less when stock prices fall. Therefore, they are more suited
to conservative equity investors. Like for all equity funds, you must invest only through the
SIP route.
Fund Name 1year return(in%) 3year return(in%) 5-year return(in%)

Axis Blue chip Fund 10.11 17.13 16.69
S&P BSE 100 17.07 17.21 14.62
Equity large cap 12.45 15.53 13.38
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Axis Mutual Fund
Launch Date: 05-Jan-2010
Return Since Launch: 12.79%
Benchmark: S&P BSE 100 TRI
Risk meter: Very High
Type: Open-ended
Assets: ₹ 34,182 Cr (As on 31-Jan-

2022)
Expense: 1.61% (As on 31-Jan-2022)

Risk Grade: Low
Return Grade: High
Turnover: 50.00%
Fund Manager - Shreyas Develkar Since 23 November 2016

Education: Mr. Develkar is a B. Tech from UDCT Mumbai and PGDM (Management) from
JBIMS Mumbai University
Experience: Prior to joining Axis Mutual Fund he has worked with BNP Paribas Mutual Fund
as a Fund Manager, IDFC Capital, JP Morgan Services India and Calyon Bank.
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• Mirae Asset Large Cap Fund

Mirae Asset Large 10.91 15.56 14.02
Cap Fund (Regular
plan)
S&P BSE 100 17.07 17.21 14.62
Fund House: Mirae Asset Mutual Fund

Launch Date: 04-Apr-2008
Benchmark: NIFTY 100 TRI
Type: Open-ended

2022)

Risk Grade: Below Average
Return Grade: Above Average
Turnover: 20.00%
Fund Manager
Gaurav Khandelwal since 18 October 2018

Education: Mr. Khandelwal is a CA and CFA
Experience: Prior to joining Mirae Asset Investment Managers (India) he has worked with
Edelweiss Securities Ltd., Ambit Capital Private Limited, Emkay Global Private Limited,
CRISIL Limited and ICICI Bank.
Gaurav Mishra since 31 January 2019

Education: Mr. Mishra has done BA ECO (HONS) and MBA, IIM Lucknow
45
Experience: Mr. Mishra has over 24 years of experience in investment management and equity
research functions. Prior to joining Mirae Asset Mutual Fund, he has worked as Senior
Portfolio Manager with ASK Investment Managers Limited.
• Parag Parikh Long Term Equity Fund
NAV as on 28 Feb 22 ₹47.4395

Net Assets (AUM) as on 31 Jan 2022 ₹20,412 Cr.
Launch Date 24 May 2013
Category Equity
Type Open Ended Fund
Risk Moderately High
AMC -PPFAS Asset Management Pvt. Ltd.

Parag Parikh Long 28.5 25.2 19.7
Term Equity Fund
S&P BSE 100 17.07 17.21 14.62
Fund Manager-
Raj Mehta since Jan 2016
Rajeev Thakkar since 24 may 2013
Raunak Onkar since 24 May 2013
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• UTI Flexi Cap Fund
A flexi-cap fund is a type of mutual fund that is not restricted to investing in companies
with a predetermined market capitalization. This type of fund structure will be indicated in
the fund's prospectus. A flexi-cap fund can provide the fund manager with greater investment
choices and diversification possibilities

UTI Flexi Cap Fund 12.55 20.68 16.74
S&P BSE 500 17.07 17.21 14.62
Equity Flexi cap 13.80 16.40 13.12
Fund
Fund House: UTI Mutual Fund

Launch Date: 18-May-1992
Benchmark: NIFTY 500 TRI
Type: Open-ended

2022)

Return Grade: High
Turnover: 10.00%
Fund Manager-
Ajay Tyagi Since 11 January 2016
Education: Mr Tyagi has done CFA Charter holder from The CFA Institute, USA and Masters
in Finance from Delhi University.
Experience: He has been working in equity research in UTI since 2000. He has also worked as
Assistant Fund Manager in the Offshore Funds division
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• Axis Midcap Fund
"When you invest for seven years or more, you can expect gains that comfortably beat the
inflation rate as well as returns from fixed income options.
This is a fund that invests in medium-sized companies. Compared to those that invest in larger
companies, such funds tend to fall more when stock prices fall. So, while you can expect higher
returns in the long term, there will be more severe ups and downs along the way

Axis Midcap Fund 17.30 22.55 19.65
S&P BSE 150 22.62 23.56 15.76
Midcap
Equity Midcap Fund 18.69 21 13.94
Fund House: Axis Mutual Fund

Launch Date: 18-Feb-2011
Benchmark: S&P BSE 150 Midcap TRI
Type: Open-ended
₹ 16,754 Cr (As on 31-Jan-
Assets:
2022)
1.84% (As on 31-Jan-
Expense:
2022)
Risk Grade: Low
Return Grade: High
Fund Manager
Shreyas Devalkar Since 23 November 2016
Education: Mr. Devalkar is a B. Tech from UDCT Mumbai and PGDM (Management) from
JBIMS Mumbai University
Experience: Prior to joining Axis Mutual Fund he has worked with BNP Paribas Mutual Fund
as a Fund Manager, IDFC Capital, JP Morgan Services India and Calyon Bank.
48
• Kotak Emerging Equity Fund

Kotak Emerging 18.65 23.35 15.59
Equity Fund
S&P BSE 150 22.62 23.56 15.76
Midcap
Equity Midcap Fund 18.69 21 13.94
Kotak Mahindra Mutual

Fund House:
Fund
Launch Date: 30-Mar-2007
Benchmark: NIFTY Midcap 150 TRI
Type: Open-ended

2022)

Turnover: 0.04%
Fund Manager-
Mr. Pankaj Tibrewal Since 27 May 2010
Education: Mr. Tibrewal is a B. Com (H) from St. Xavier’s College Kolkata and MBA
(Finance) from Manchester University, U.K.
Experience: Prior to joining Kotak AMC he has worked with Principal Asset Management
Company as Fund Manager.
49
• Axis Small Cap Fund
Suitable when invested for seven years or more, you can expect gains that comfortably beat the
inflation rate as well as returns from fixed income options. This is a fund that invests in smaller
companies.

Axis Small Cap Fund 38.39 32.43 22.33
S&P BSE 250 Small 27.24 21.92 12.02
cap
Equity Small cap 32.11 28.01 16.90
Fund
Fund House: Axis Mutual Fund

Launch Date: 29-Nov-2013
NIFTY Small cap 250
Benchmark:
TRI
Type: Open-ended

2022)

Risk Grade: Low
Turnover: 19.00%
Fund Manager-
Anupam Tiwari since 6 October 2016
Education: Mr. Tiwari is a Chartered Accountant.
Experience: Prior to joining Axis Mutual Fund he was associated with Principal Mutual Fund
(July 25, 2011-Sep 21, 2016), Reliance Life Insurance Ltd. (Sep 22, 2010-Jul 15, 2011) and
Reliance MF (Mar 21, 2005-Sep 21, 2010.
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• SBI Small Cap Fund
When you invest for seven years or more, you can expect gains that comfortably beat the
inflation rate as well as returns from fixed income options.
This is a fund that invests in smaller companies. Compared to those that invest in larger
companies, such funds tend to fall more when stock prices fall. So, while you can expect higher
returns in the long term, there will be more severe ups and downs along the way.

SBI Small Cap Fund 23.80 27.24 20.53
S&P BSE 250 Small 27.24 21.92 12.02
cap
Fund
Fund House: SBI Mutual Fund

Launch Date: 09-Sep-2009
S&P BSE 250 SmallCap
Benchmark:
TRI
Type: Open-ended

2022)

Turnover: 25.00%
Fund Manager-
R. Srinivasan since 13 January 2012
Education: Mr. Srinivasan is M. Com and MFM.

Experience: Prior to joining SBI Mutual Fund he has worked with Principal AMC,
Oppenheimer & Co, Indosuez WI Carr and Motilal Oswal
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• SBI Equity Hybrid Fund
When you invest for five years or more, you can expect gains that comfortably beat the inflation
rate as well as returns from fixed income options. But be prepared for ups and downs in your
investment value along the way.
Aggressive hybrid funds invest 65-80 per cent of your money in equity shares and the rest in
bonds. Their returns are slightly lower than those of pure equity funds which invest all your
money in shares, but they also fall relatively less when the stock market’s decline. This makes
them suitable for conservative equity investors or first-time equity investors who are not used
to sharp ups and downs.

SBI Equity Hybrid 23.80 27.24 20.53
Fund
S&P BSE 250 Small 27.24 21.92 12.02
cap
Fund
Fund House: SBI Mutual Fund

Launch Date: 31-Dec-1995
CRISIL Hybrid 35+65
Benchmark:
Aggressive Index
Type: Open-ended

2022)

Fund Manager
R. Srinivasan since 13 January 2012
Education: Mr. Srinivasan is M. Com and MFM.

Experience: Prior to joining SBI Mutual Fund he has worked with Principal AMC,
Oppenheimer & Co, Indosuez WI Carr and Motilal Oswal
52
• Mirae Asset Hybrid Equity Fund
Suitable to invest for five years or more, you can expect gains that comfortably beat the
inflation rate as well as returns from fixed income options. But be prepared for ups and downs
in your investment value along the way.

Mirae Asset Hybrid 10.59 14.60 12.63
Equity Fund
VR Balanced TRI 15.07 15.52 13.59
Aggressive Hybrid 12.83 14.08 10.98
Fund House: Mirae Asset Mutual Fund

Launch Date: 29-Jul-2015
CRISIL Hybrid 35+65
Benchmark:
Aggressive Index
Type: Open-ended

2022)

Risk Grade: Low
Turnover: 67.00%
Fund Manager
Mr. Harshad Borawake Since 1 April 2020
Education: Mr. Borawake is MBA(Finance) & B.E.(Polymers)
Experience: Prior to joining Mirae Asset Mutual Fund, he has worked with Motilal Oswal
Securities Ltd. as Vice President and Capmetrics & Risk Solutions Private Ltd. as Research
Analyst - Equity.
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o MUTUAL FUNDS SCHEMES ACCORDING TO MATURITY PERIOD:
A. Open-ended Fund:
An open-ended Mutual fund is one that is available for subscription and repurchase on a
continuous basis. These Funds do not have a fixed maturity period. Investors can conveniently
buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis.
The key feature of open-end schemes is liquidity.
B. Close-ended Fund:
A close-ended Mutual fund has a stipulated maturity period e.g., 5-7 years. The fund is open
for subscription only during a specified period at the time of launch of the scheme. Investors
can invest in the scheme at the time of the initial public issue and thereafter they can buy or
sell the units of the scheme on the stock exchanges where the units are listed.
C. Intervals fund:
Interval funds combine the features of open-ended and close ended-schemes. They may be
traded on the stock exchanges or may be open for sale or redemption during predetermined
intervals at NAV based prices.
Following are the basic types of Mutual Fund:

a. Growth Funds
b. Income Funds
c. Balanced Funds
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i. Growth/Equity oriented scheme: -
These schemes seek to invest a majority of their funds in equities and a small portion in money
market instruments. These funds seek to provide growth of capital with secondary emphasis on
dividend. Such schemes have the potential to deliver superior returns over the long term
because the market boom and depression phases get evaded out over a longer time
span. However, because they invest in equities, these schemes are exposed to fluctuations in
value especially in the short-term.
ii. Income/Debt Oriented Scheme:
The aim of the income fund is to provide regular and steady income to investors. Such schemes
generally invest in fixed income securities such as bonds, corporate, debentures, government
securities and money market instruments. Such funds are less risky compared to equity
schemes.
iii. Balanced Scheme:
These are also known, as Hybrid Schemes. These balanced schemes aim to provide both
growth and regular income. Such schemes periodically distribute a part of their earning and
invest both in shares and fixed income securities in the proportion indicated in their offer
documents. In a rising stock market, the NAV of these schemes may not normally keep pace,
or fall equally when the market falls
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❖ TYPES
a. Equity Funds
Equity mutual funds buy stocks of a collection of publicly traded companies. Most mutual
funds on the market (55%) are some types of equity fund, according to the Investment
Company Institute. The younger you are, the more your portfolio should include equity funds,
financial planner’s advice, as you have more time to weather inevitable ups and downs in
market value. The equity funds have a higher potential for growth but more potential volatility
in value.
b. Bond Funds
Generally, have higher risks than money market funds, due to the fact that they typically pursue
strategies aimed at producing higher yields. Unlike money market funds, there are no laws to
restrict bond funds to high-quality or short-term investments. And because there are many
different types of bonds, these funds can vary dramatically in their risks and rewards. One of
the major risks associated with bond funds is “credit risk,” or the risk that companies or other
issuers may fail to pay their debts. The credit quality of the bonds contained in a fund will have
a direct impact on their credit risk. Another risk is “interest rate risk,” or the risk that the market
value of the bonds will go down when interest rates increase. Funds that invest in longer-term
bonds tend to have a higher interest rate risk and fluctuate more dramatically in value. Interest
earned on a bond fund’s portfolio is passed through to investors as dividends, which may be
taken in cash or reinvested. This component of a bond fund’s earnings (less expenses) is called
its yield. The two major factors that affect a bond fund’s yield are the quality and maturity of
the bonds in the portfolio. In general, lower-quality bonds and those with longer maturities
entail greater risk and generally offer higher yields. The share price or NAV of a bond fund
may change based on the market value of the bonds in the portfolio. The value of the bonds in
the portfolio may change in response to changes in interest rates. To calculate the total return
of a bond fund, it is necessary to include the change in share price along with any income
earned (dividends and capital gains distributions).
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Bond funds are the most common type of fixed-income mutual funds, where (as the name
suggests) investors are paid a fixed amount back on their initial investment. Bond funds are the
second most popular mutual fund type, accounting for about one of every five funds on the
market, according to the ICICI. Just as advisors say equity funds favor the young, investors
nearing retirement should have more bond funds in their portfolio to protect their nest egg while
earning more interest than sitting that cash in a bank savings account. Rather than buy stocks,
bond funds invest in government and corporate debt. Considered a safer investment than stocks,
bond funds have less potential for growth than equity funds.
c. Money Market Funds
Typically, less volatile than other types of mutual funds because they invest in high-quality,
short-term money market instruments that are issued and payable in U.S. dollars. A money
market fund is not designed to offer capital appreciation. Money market funds pay dividends
that are usually declared daily, paid monthly, and generally reflect short-term interest rates.
“Inflation risk,” the risk that the inflation rate will grow faster than the investment’s return over
time, can be a concern for money market fund investors. A money market fund that qualifies
as a “government money market fund” under applicable regulations must invest 99.5% of its
assets in cash, government securities and/or repurchase agreements that are backed by cash and
government securities. Other types of money market funds may invest in government securities
as well as certificates of deposit, commercial paper of companies, or other highly liquid and
low-risk securities. These types of money market funds may include funds that seek to operate
as a “retail money market fund” under applicable regulations. A “retail money market fund” is
a fund that will maintain policies and procedures reasonably designed to limit all beneficial
owners of the fund to natural persons. Effective October 14, 2016, only “government” and
“retail” money market funds may maintain a stable $1.00 net asset value per share,
and only “government” money market funds can operate without the possible imposition of a
liquidity fee and/or redemption gate.
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Money market mutual funds are fixed-income mutual funds that invest in high-quality, short-
term debt from governments, banks or corporations. Examples of assets held by these funds
include U.S. Treasuries, certificates of deposit and commercial paper. They considered one of
the safest investments and make up 15% of the mutual fund market, according to the ICICI.
d. Industry or Sector Funds
May specialize in a particular industry segment, such as technology or consumer products

stocks. A sector fund concentrates its investments in one sector and involves more risks than a
fund that invests more broadly. These mutual funds focus on a particular industry, such as
technology, oil and gas, aviation or health care. Ownership in different sector funds can help
diversify your portfolio, so if one industry is hit hard (like the bursting of the dot-com stock
bubble in 2000), those losses can be offset by gains in other sectors. For example, investors
who want exposure to gains by companies like Google and Apple could put money in a
technology fund.
e. Balanced Funds
Also known as asset allocation funds, these investments are a combination of equity and fixed-
income funds with a fixed ratio of investments such as 60% stocks and 40% bonds. The best-
known varieties of these funds are target-date funds, which automatically reallocate the ratio
of investments from equities to bonds the closer you get to retirement.
f. Growth and Value Funds
The investment style of the fund is another mutual fund differentiator. Value funds look for
companies whose stock is undervalued by the market. Growth funds, as the name suggests,
seek stocks that fund managers believe will have better than average returns.
58
g. International, Global and Emerging Market Funds
Geographic location can also determine how mutual funds are built. International funds invest
in companies doing business outside the U.S., while global funds invest in companies doing
business both in the U.S. and abroad. Emerging market funds target countries with small but
growing markets.
h. Other Mutual Funds:
1. Index Fund –
An index fund is a type of mutual fund whose holdings match or track a particular market
index, such as the S&P 500. Index funds have exploded in popularity in recent years, thanks to
the rise of passive investing strategy, which, over time, typically earns better returns than an
actively managed approach. Like equity funds, index funds can vary by company size, sector
and location.
2. Specialty or Alternative Funds –
This catch-all category of funds includes hedge funds, managed futures, commodities and real
estate investment trusts. There is also growing investor interest in corporate socially
responsible mutual funds, which avoid investing in controversial industries like tobacco or
firearms and instead focus on funding companies with strong environmental and labor
practices.
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❖ PROFESSIONAL EXPERTISE:
The financial landscape can appear confusing and complex to the common man. It helps to
have a ‘guide’ to take you through all the various financial choices and their implications.
These financial guides are what are known as financial advisors. A good financial advisor can
not only help you fulfill your financial goals and build wealth, but also bring a wealth of
knowledge and useful tools to your investment journey.
Financial planning has a price one way or the other. Either it will cost you your time, effort and
energy (if you do everything yourself) or it will cost you some money (if you go through an
advisor). For most investors, having an advisor partner with them on their journey gives them
an edge and adds an X factor because there is always a professional looking after you.
Money is managed by fund managers who are up to date with all the market happenings and
are adept at optimizing returns. The fund managers are the people who take full care of the
money, which is invested in the mutual funds. The customers who are investing are having full
belief that they will get good amount of return. Most of the time it comes true. Because the
professional’s job is to get maximum return with minimum investment and they work for this
with full attention.
1. Saves time: The customers need not follow all the happenings in the market. If they are
interested then they can have an eye on the market. Otherwise, they can just invest the amount
and just forget about the money invested. All the activities like diversifying the amount are
done by the fund managers itself. So, it helps the customers to save their time.
2. Small Amount can be Invested: Customers can start with small amount of investment; The
Mutual Fund don’t demand big investment. Anyone can start the investment in mutual funds
with a smaller amount. So, it helps even the normal people to invest in the market. It attracts
more customers with less income.
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3. Tax Benefit: Many mutual funds help in saving tax. Many people invest in mutual funds
because it gives tax saving as well as good return. Even though the customers are saving the
return it also helps the people to save tax as well. But the tax benefit is not for all the mutual
fund schemes. It is available for some specific schemes.
4. Liquidity: One can buy and sell units at NAV (Net Asset Value) on a daily basis in all open-
ended schemes. But most of the times mutual funds give a good return when you deposit the
amount for a longer fixed term. But the liquidity is much easier than all the other funds or
investments.
However, all above benefits of Fund Manager you trust your financial advisor and ensure that
you are still in the driving seat – after all, this is your money and your investments. To ensure
your finances are correctly managed, keep monitoring all your investments by closely working
with your financial advisor and keeping up-to-date with your investments. Also, the advisor
should be completely transparent with why he is recommending anything to you, and should
have a rational justification behind every recommendation. But despite this, if you don’t spend
some time educating yourself with the basics, you may fall behind in the long term.
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Registration process to Invest in Mutual Fund?
1) Via Physical Mutual Fund Application Form-

You need to fill the form and validate it with your signature. Attach the account statement,
issued by the AMC or Fund houses along with the DRF/CRF, and submit the same to your DP.
The DP checks the validity of your holdings with the issuer – the AMC or the RTA (e.g.,
CAMS, Karvy)
2) Via Online Mode (Website of Mutual Fund)-

1. Register account with the mutual fund company
Most mutual funds will require you to create an account first. The personal details that are
required are similar to that required in the mutual fund application form. Some fund houses
may ask you for a basic registration first and then a detailed registration when completing the
transaction. The process would vary from one fund house to another.
2. Choose the desired scheme and investment details
When you come to the investment section of the online from, do ensure you select the Plan
Type as ‘Direct’. Also double-check the scheme option. Under direct plan, you will get
the Growth or Dividend Option. Choose the option that conforms to your financial goals.
3.Verify and complete transaction

After submitting the above, you will be asked to verify the details. Many overlook this and
proceed ahead. It is best not to proceed hastily and take time to read the form carefully. Many
a times there are typo errors in the bank account number. Getting it changed later is a tedious
task. Hence, try to avoid such mistakes early on.
You may also need to authenticate the form submission through a One Time Password (OTP)
that is sent to the registered mobile number or email id. Some fund houses may complete this
authentication process as the first step. Once successfully verified, you can complete the
transaction on the next page using mode of payment opted for earlier. You will be provided a
Transaction Reference Number. Note this down, as it may be helpful if an error occurs in the
transaction process. Once the payment is completed successfully, you will receive a
confirmation on your email, mobile or both.
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3) Via Mobile App of Mutual Fund
Same process as mentioned above to be followed while investing through App.
Centralized KYC (C-KYC) in Securities Market
KYC registration is centralized through KYC Registration Agencies (registered with SEBI)
Each investor to undergo KYC process only once in securities market and details would be
shared with other intermediaries by the KRAs
Standard Account Opening form (has 2 parts)
-Part I Basic and uniform KYC details of the investor

-Part II Additional KYC information as may be sought
separately by the Mutual Fund
Mutual Funds investment procedure
1. Indicate whether you are a First Time Investor/ Existing Investor.

2. Visit official website of KRA and check whether you are KYC compliant or not.
3. You must submit this KYC status.
4. Provide your details like name, address, etc.
5. Submit Bank account details and copy of “Cancelled Cheque”.
6. Once documents are accepted by Mutual Fund Company, you may start making investment.
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Investment Modes in Mutual Funds.
1)Lumpsum investment-
•One time investment

•Usually, large sum of money is invested in one go
•Investor faces risk of volatility in markets
2)Systematic Investment Plan-
•Staggered Investment
•Period of commitment 6 months, 1 / 3 / 5 years.
•Specific intervals monthly, quarterly, half yearly.
•Made on specific dates e.g., 1st, 5th, 10th, 15th of every month.
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Investment Modes in Mutual Funds.
o Direct Mutual Fund
•Directly offered by fund house

•No involvement of third-party agent’s brokers or distributors
•No commissions and brokerage
•Have low Expense ratio (because of no commissions)
•Have high NAV
•Return is higher due to a lower expense ratio.
o Regular Mutual Fund
•Bought through an intermediary

•Intermediaries can be brokers, advisors or distributors
•Commissions and brokerage paid
•High Expense ratio as there are commissions to pay
•Low NAV
•Return is lower due to a higher expense ratio.
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❖ How to check information about the Mutual Funds (Offer)
1)Statement of additional information (SAI)
•Contains generic and statutory information of mutual fund

•Contains financial information of mutual fund
•Lays down rights of investor
•Other additional information
2)Scheme information document (SID)
•Scheme type (open or closed end)

•Investment objective
•Asset allocation
•Investment strategies
•Terms with regard to liquidity
•Fees and expenses
•Other information relating to the scheme.
66
Risk-o-Meter and its importance.
Six levels of risk for mutual fund Schemes:
I. Low Risk
II. Low to Moderate Risk
III. Moderate Risk
IV. Moderately High Risk
V. High Risk and
VI. Very High Risk
Importance of Risk-o-meter:
-Helps align risk that a fund carries with the risk profile of the investor
-Equity as asset class Volatile High risk
-Debt as asset class Stable Low risk
-Hybrid Moderate Depends on allocation and concentration
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MUTUAL FUNDS DISTRIBUTION CHANNELS
Depending on their risk profile, investors might be classed as aggressive, moderate, or

conservative in their investment intentions. Asset management companies (AMCs) create
several sorts of fund schemes for each of these categories, and it's critical for investors to
acquire the ones that meet their investing objectives. Funds are bought and sold through
distribution channels, which play an important role in describing the many schemes available
to investors, as well as their investment strategy, charges, and expenses. Direct and indirect
distribution channels are the two types of distribution channels. Direct routes involve investors
purchasing units directly from the fund AMC, whilst indirect channels entail the use of agents.
Let's take a closer look at these distribution channels.
Direct channel-
Direct Channel is an excellent option for investors who don't require agent advice and are
familiar with the principles of the fund sector. The channel has the advantage of being low-
cost, which boosts long-term returns dramatically. Earlier it has mentioned above as Direct
Plan.
•Directly offered by fund house

•No involvement of third-party agent’s brokers or distributors
•No commissions and brokerage
•Have low Expense ratio (because of no commissions)
•Have high NAV
•Return is higher due to a lower expense ratio.
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Indirect Channel-
The indirect route is extremely common in the fund sector. It entails the use of agents, who
serve as go-betweens for the fund and the investor. These agents aren't limited to mutual funds;
they can work with a variety of financial instruments. They have a thorough understanding of
how financial instruments work and are qualified to act as financial advisors.
•Bought through an intermediary

•Intermediaries can be brokers, advisors or distributors
•Commissions and brokerage paid
•High Expense ratio as there are commissions to pay
•Low NAV
•Return is lower due to a higher expense ratio.
Some of the players in the indirect distribution channels are listed below.
a) Independent financial advisers (IFA): These are people who have been trained to offer
AMCs' products. Some IFAs are certified financial planners (CFPs) (certified financial
planners). They assist investors in selecting the appropriate investment schemes and in
financial planning. IFAs keep their costs under control by selling funds and earning
commissions.
b) Organized distributors: They are the indirect distribution channel's backbone. They have the
infrastructure and resources in place to deal with administrative paperwork, purchases, and
returns. These distributors set up offices in rural and semi-urban areas to cater to the different
nature of the investor community as well as the country's enormous geographic dispersion.
69
b) Banks: They sell mutual funds through their network. For marketing funds, their existing
customer base functions as a captive prospective investor pool. They also conduct client wealth
management and portfolio management, with mutual funds as one of the asset types. The
indirect channel players assist investors in purchasing and redeeming fund units. They attempt
to comprehend investors' risk profiles and recommend fund schemes that best meet their
objectives. When investors require expert guidance on the risk-return mix or need assistance
comprehending the peculiarities of the financial securities in which the fund invests, as well as
other significant mutual fund characteristics like benchmarking, the indirect channel should be
favored over the direct channel.
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FEATURES STUDIED BY INVESTORS IN MUTUAL FUND
If mutual funds are emerging as the favorite investment vehicle it is because of the many
advantages. They have over other forms and avenues of investing parties for the investors who
has limited resources available in terms of Capital and ability to carry out detailed reserves and
market monitoring.
A. ADVANTAGES OF MUTUAL FUND:
o Professional Management
Mutual Funds provide the services of experienced and skilled professionals, backed by a
dedicated investment research team that analyses the performance and prospects of companies
and selects suitable investments to achieve the objectives of the scheme.
o Over-Diversification
Mutual Funds invest in a number of companies across a broad cross-section of industries and
sectors. This diversification reduces the risk because seldom do all stocks decline at the same
time and in the same proportion. You achieve this diversification through a Mutual Fund with
far less money than you can do on your own.
o Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as
bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds
save your time and make investing easy and convenient.
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o Return Potential
Over a medium to long-term, Mutual Funds have the potential to provide a higher return as
they invest in a diversified basket of selected securities
o Low Costs
Mutual Funds are a relatively less expensive way to invest compared to directly investing in
the capital markets because the benefits of scale in brokerage, custodial and other fees translate
into lower costs for investors.
o Liquidity
In open-end schemes, the investor gets the money back promptly at net asset value related
prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange
at the prevailing market price or the investor can avail of the facility of direct repurchase at
NAV related prices by the Mutual Fund
o Transparency
You get regular information on the value of your investment in addition to disclosure on the
specific investments made by your scheme, the proportion invested in each class of assets and
the fund managers investment strategy and outlook.
o Flexibility
Through features such as regular investment plans, regular withdrawal plans and dividend
reinvestment plans, you can systematically invest or withdraw funds according to your needs
and convenience.
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o Affordability
Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund
because of its large corpus allows even a small investor to take the benefit of its investment
strategy.
o Well Regulated
All Mutual Funds are registered with SEBI and they function within the provisions of strict
regulations designed to protect the interests of investors. The operations of Mutual Funds are
regularly monitored by SEBI.
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B. DISADVANTAGES OF MUTUAL FUNDS:
Above I have mentioned the various advantages of Mutual Funds but it also suffers from a lot
of drawbacks as the market is volatile and it is ever affected by national as well as international
factors, these days we can see that crude oil prices in international market have become an
important factor in determining the market movement.
o Fluctuating Returns
Mutual funds are like many other investments without a guaranteed return: there is always the
possibility that the value of your mutual fund will depreciate. Unlike fixed-income products,
such as bonds and Treasury bills, mutual funds experience price fluctuations along with the
stocks that make up the fund. When deciding on a particular fund to buy, you need to research
the risks involved - just because a professional manager is looking after the fund, that doesn’t
mean the performance will be always good.
o Diversification
Although diversification is one of the keys to successful investing, many mutual fund investors
tend to over diversify. The idea of diversification is to reduce the risks associated with holding
a single security; over diversification (also known as diversification) occurs when investors
acquire many funds that are highly related and, as a result, don’t get the risk reducing benefits
of diversification. At the other extreme, just because you own mutual funds doesn’t mean you
are automatically diversified. For example, a fund that invests only in a particular industry or
region is still relatively risky. For example: Sect oral Funds
o Cash and More Cash

As you know already, mutual funds pool money from thousands of investors, so everyday
investors are putting money into the fund as well as withdrawing investments. To maintain
liquidity and the capacity to accommodate withdrawals, funds typically have to keep a large
portion of their portfolios as cash. Having ample cash is great for liquidity, but money sitting
around as cash is not working for you and thus is not very advantageous.
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o Costs
Mutual funds provide investors with professional management, but it comes at a cost. Funds
will typically have a range of different fees that reduce the overall payout. In mutual funds, the
fees are classified into two categories: shareholder fees and annual operating fees. The
shareholder fees, in the forms of loads and redemption fees are paid directly by shareholders
purchasing or selling the funds. The annual fund operating fees are charged as an annual
percentage - usually ranging from 1-3%. These fees are assessed to mutual fund investors
regardless of the performance of the fund. As you can imagine, in years when the fund doesn’t
make money, these fees only magnify losses.
o Management over costs:
The capitalist pays investment management fees as long as he remains with the fund, even
whereas the worth of his investments area unit declining. He conjointly pays for funds
distribution charges that he wouldn't incur in direct investments.
o No tailored portfolios:
The terribly high net-worth people or massive company investors might notice this to be a
constraint as they’ll not be ready to build their own portfolio of shares, bonds and alternative
securities.
o Managing a portfolio of funds:
Availability of an outsized variety of funds will really mean an excessive amount of alternative
for the capitalist. So, he might once more want recommendation to choose a fund to attain his
objectives. Delay in redemption: It takes 2-3 days for redemption of the units and for the cash
to flow back to the investor’s account.
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C. ADVERTISMENTS:
Nowadays Advertisement is a biggest platform for the promotion of any scheme or product.
Mutual funds companies in India also applying the same. Till now, mutual fund advertising in
India has typically devoted a greater area to statutory warnings than cigarette advertising used
to, or liquor advertising does in parts of the world where it's allowed. It isn't unusual as up to
40% of print advertising is devoted to warnings and disclosures of one kind or another.
Now, finally, market regulator SEBI has rationalized and simplified the regulations pertaining
to such advertising. And for once, when a regulatory organization says rationalized, it's actually
true. The bulk of the verbiage in existing fund advertising consists of various disclaimers and
risk factors. For example, the leading disclaimer is that the reader of the advertisement is
advised to take advice from an advisor because deciding on an investment might require
professional advice. It generally goes on to say that there's no assurance or guarantee that the
scheme's goals will be achieved. Then, it goes on to say that the past performance of the
schemes is neither an indicator nor a guarantee of future performance, and may not be
considered for future investment decisions. This is all unexceptionable stuff, in a legalistic
sense. Except that anyone who understands the basic psychology about how people take
decisions that such warnings are unlikely to actually affect investor behavior. If you need to be
advised that you need might need advice from an advisor, then you are unlikely to heed that
advice anyway.
SEBI's code does it better. Firstly, it reduces the warning just to the brief 'Mutual fund
investments are subject to market risks. Please read the offer document carefully' which is a
big improvement from the earlier stuff. More importantly, the new code lays down the
principles rather than micro-manage the language. It says the ads should be 'accurate, true,
clear, complete, unambiguous and concise' that they should not contain statements 'which are
biased or deceptive, based on assumption/projections and testimonials' or 'Slogans unrelated to
nature and risk or return profile of the product'. The code also specifically bans the use of
celebrities, something that is a sharp departure from what is allowed to insurance companies
and bank.
76
The one part of the new regulations which goes down to details is the part that specifies how
funds' performance and other financial data is to be specified. This part is important because
the advertising of financial products is an important component of the integrity of the product.
Unlike say, a house or car or clothes, there is no physical object to examine and the entire
decision-making process is based on information alone.
As such, the standardization and comparability, the core performance and returns data are
crucial. Another provision is that fund advertising must not include any ratings because such
ratings are not strictly comparable. Some of these ratings are used by funds in their advertising,
the banning of ratings would lead to some loss of business to Rating agencies.
However, this is not the case. Most firms who Research rates all funds anyway and doesn't
charge anyone for these ratings. They are published in magazines and are available freely
Anyone is free to access them and use them. In fact, for the investor, it is actually better to see
these ratings on our website rather than in a fund's ad. That's because only funds that get a good
rating would use them in advertising.
77
When Are Mutual Funds Considered a Bad Investment?
Mutual funds are thought to be a largely risk-free investment. When investors consider certain
unfavorable factors, such as the fund's high expense ratios, multiple hidden front-end and back-
end load charges, lack of control over investment decisions, and diluted returns, mutual funds
are considered a terrible investment.
High Annual Expense Ratios-
Mutual funds are required to declare the annual percentage charges they levy on their investors
to cover the costs of running their investing businesses. The expenditure ratio percentage,
which can be as high as 3%, reduces the gross return of a mutual fund. Expense ratios in the
sector as a whole, according to Vanguard, averaged 0.54 percent in 2020.
Historically, the majority of mutual funds have outperformed the market when they track a
generally steady benchmark, such as the S&P 500. Excessive yearly costs, on the other hand,
might make mutual funds an unappealing investment, as investors can get greater returns by
investing in broad market equities or exchange-traded funds.
Load Charges-
Many mutual funds have multiple classes of shares that come with front- or back-end loads,
which are fees charged to investors when they buy or sell a fund's shares. Certain back-end
loads are deferred sales charges that can be deferred for a number of years. In addition, several
fund classes levy 12b-1 fees at the time of sale or acquisition. Load fees can range from 2% to
4%, and they can detract from mutual fund returns, making them unattractive to investors who
want to move their shares frequently.
78
Lack of Control-
Mutual funds may not be suited for investors who want complete control over their portfolios
and the ability to rebalance their holdings on a regular basis because they do all of the picking
and investing. Mutual funds may be problematic for investors who want their portfolios to be
consistent because many prospectuses contain disclaimers that allow them to stray from their
declared investing objectives. When selecting a mutual fund, it's critical to look at the fund's
investing plan as well as the index fund it may be monitoring to see whether it's a safe
investment.
Returns Dilution-
Although not all mutual funds are harmful, they are often extensively regulated and cannot
have concentrated holdings that surpass 25% of their overall portfolio. As a result, mutual funds
may produce diluted returns because they can't focus their portfolios on a single best-
performing asset like a single stock may. However, because it is difficult to forecast which
stock will do well, most investors who want to diversify their portfolios prefer mutual funds.
79
Mutual Fund Recent Updates
Mutual fund (MF) industry in India is maturing with broad-basing of investors and increasing
geographical spread. MFs in India have become major players in the equity and corporate bond
markets and are also providing crucial liquidity support to the money market. Consequently,
their influence on price movements in equity and debt markets as also domestic liquidity
conditions has increased over time. While the penetration of the MF industry in India, as
measured by the Assets under Management (AUM)/GDP ratio, is still low compared with the
global average, favorable demographics, a history of high savings propensity and regulatory
reforms brighten the outlook for the industry.
10-year Benchmark yields grew quarterly and annually, Liquidity remained in surplus
o 10-year benchmark yields grew 23 bps on quarterly basis due to following reasons:
− Rise in global crude oil prices
− Worries over rate hike by U.S Federal Reserve (Fed) in 2022
− Concerns over rise in retail inflation that may impact monetary policy
− Lack of support from RBI in form of purchase of government securities through OMOs.
o However, RBI keeping key rates unchanged and maintaining accommodative policy stance
to support growth restricted losses to some extent
o Yields grew 56 bps annually following rise in global crude oil prices, U.S. Treasury yields
and domestic inflationary pressures.
o Liquidity surplus came down to some extent but remained favorable.
80
Nifty 50 saw modest losses on quarterly basis, gained annually
o Nifty 50** witnessed 1% decline QoQ as of December 31, 2021. Investors remained worried
over:
− Omicron variant of coronavirus would result in additional lockdowns and jeopardize the
global economic recovery
− Growing anticipation of sooner than expected interest rate hike by U.S. Fed. However,
improved macro-economic numbers boosted the risk appetite of market participants.
o Index grew 26% on annual basis despite wider economy shuttling between recovery and
relapse, dictated by multiple mutations of the coronavirus. The below factors, however,
supported buying interest:
− Union Budget announcements for FY22
− Upbeat economic data − Robust corporate earnings from some of the index heavyweights.
81
Gold and Brent Crude prices surged; Rupee incurred modest losses quarterly
• Gold prices surged on quarterly basis on worries that the Omicron might lead to delay
in the global economic recovery. Annual decline reflected rise in U.S Treasury Yields.
Reports that U.S. Fed in its monetary policy review indicated that interest rates may be
raised sooner than expected added to losses.
• Brent crude prices grew both quarterly and annually. Quarterly growth showed U.S.
fuel demand holding up well despite soaring Omicron coronavirus infections. Prices
surged annually on tight supplies due to OPEC+ supply curbs amid expectation of
recovery of demand and slow pace of nuclear talks between Iran and the U.S.
• Rupee saw losses on quarterly and annual basis. Loss on quarterly basis reflected
concerns over continuous foreign outflows from domestic equity market and elevated
global crude oil prices. Annual losses reflect higher U.S. Treasury yields and worries
that the U.S. Fed may speed up the tapering of its monthly asset purchase program
Source: Refinitiv
82
Top 10* AMCs accounted for nearly 82% of QAAUM
o Top 10 composition has remained unaltered for six straight quarters in a row in Q3FY21
o Amongst top 10 AMCs, SBI Mutual Fund gained the maximum market share on quarterly
basis, witnessed highest quarterly growth, and became the first AMC to surpass Rs. 6 lakh
crore mark
o Aditya Birla Sun Life Mutual Fund lost the maximum market share followed by HDFC
Mutual Fund but both remained in the top 4
o IDFC mutual fund saw maximum decline in QAAUM followed by Aditya Birla Sun Life
Mutual Fund
83
AUM surpasses Rs. 37 lakh crore mark in Q3FY22
• MF industry ended CY21 with highest AUM ever. With a 3% quarterly and 22% annual
growth, AUM was at Rs. 37.73 lakh crore at the end of Q3FY22
• Under Open Ended category: − Top five sub-categories with maximum increase (in
Rs.) were – Liquid Fund (Rs. 37,530 crore), Other ETFs (Rs. 21,277 crore), Balanced
Advantage Fund (Rs. 19,856 crore), Index Funds (Rs. 11,606 crore) and Multi Cap
Fund (Rs. 11,418 crore)
• Top five sub-categories to experience growth (in %) were
– Multi Cap (36%), Index Funds (34%), Fund of funds investing overseas (14%), Equity
Savings Fund (13.6%) and Balanced Advantage Fund (13.2%)
− Maximum degrowth (in %) was seen by these five sub-categories under Debt Oriented
Schemes - Banking and PSU Fund (-9.4%), Low Duration Fund (-9%), Ultra Short Duration
Fund (-8%), Floater Fund (-6%) and Corporate Fund (-5%)
84
MF Industry creates new record – folios cross 12-crore mark
o with addition of 0.85 crore folios in Q3FY22, folios crossed the 12-crore mark.
o Total no. of folios went up nearly 8% QoQ and 27% YoY to 12.02 crore at quarter-end
o Folios of Overnight Funds, Multi Cap Funds and Balanced Advantage Funds grew most in
the quarter (in %) under the Open-Ended Debt, Equity and Hybrid categories, respectively
o After reiterating top five folio composition (47% of total folios) for three quarters in a row,
folio composition changed in Q3FY22
o ELSS and Large Cap funds maintained their first and second positions; Sectoral/Thematic
Funds and Flexi Cap Funds interchanged their positions to come in at third and fourth positions,
respectively; Other ETFs was the new entrant in top 5 list, thereby replacing Mid Cap fund at
the fifth position.
o Category-wise, all Open-Ended categories except Debt Oriented schemes (1.8%) witnessed
growth in December as against September.
85
SIP continues growth streak in Q3FY22
o SIP contribution has been witnessing growth continuously since May 2021; it surpassed Rs.
11,000 crore mark for the first time in Q3FY22 (November 2021)
o It grew 9% to Rs. 11,305 crores in Q3FY22 as against Q2FY22
o at quarter-end, SIP AUM stood at Rs. 5.65 lakh crore, up nearly by 4% QoQ. It was at 15%
of total industry assets.
o SIP accounts grew 9% to 4.91 crore
FPIs turned to be net sellers of domestic stocks, concerns over Coronavirus variant
weakened confidence
o foreign portfolio investors (FPIs) turned to be net sellers of domestic stocks worth Rs. 38,521
crores in Q3FY22 as against net buyers of Rs. 3,928 crores in Q2FY22. So far, in FY22,
disinvestment from FPIs is at Rs. 29,991 crores, as against investment of Rs. 218,291 crores in
the previous year period.
o the trend of foreign flows has not been encouraging this fiscal amid: − U.S. Fed’s tapering
program and prospects of rate hikes − Concerns over the highly transmissible Omicron variant
of coronavirus, which has impacted global growth outlook.
o MF investment in equity was at Rs. 51,909 crores in Q3FY22, with a quarterly growth of
30% visa-vis previous quarter. So far in FY22, investment in equity stands at Rs. 103,986
crores against disinvestment of Rs. 95,353 crores in the previous year period
86
Key takeaways from Monetary Policy Committee meetings
Dec 08, 2021
Rates
Repo rate reiterated at 4.00%
 Reverse Repo rate unchanged at 3.35%, Marginal Standing Facility (MSF) rate and Bank
Rate unchanged at 4.25%
 Accommodative stance maintained
Inflation projection
Inflation reiterated for FY22 at 5.3%
 Q3FY22 – increased from 4.5% to 5.1%; Q4FY22 – decreased from 5.8% to 5.7%
Inflation projection decreased from 5.2% to 5% for Q1FY23 and projected at 5% for Q2FY23
GDP - economic growth

• Retained GDP growth for FY22 at 9.5%
• Q3FY22 – decreased from 6.8% to 6.6% and Q4 declined from 6.1% to 6%
• GDP projection retained at 17.2% for Q1FY23 and projected at 7.8% for Q2FY23
Oct 08, 2021
Rates
 Repo rate reiterated at 4.00%

 Accommodative stance maintained.
87
Inflation Projection
 Inflation expectation lowered for FY22 from 5.7% to 5.3%

 Q2FY22 lowered from 5.9% to 5.1%; Q3FY22 – decreased from 5.3% to 4.5%; Q4FY22 –
reiterated at 5.8%
 Inflation projection raised from 5.1% to 5.2% for Q1FY23
GDP - economic growth

• Retained GDP growth for FY22 at 9.5%
• GDP for Q2FY22 raised from 7.3% to 7.9%, Q3FY22 – increased from 6.3% to 6.8% and
Q4 retained at 6.1%
• GDP projection retained at 17.2% for Q1FY23
Aug 06, 2021

Rates
 Accommodative stance maintained.
 Inflation expectation raised for FY22 from 5.1% to 5.7%
 Q2FY22 increased from 5.4% to 5.9%; Q3FY22 – increased from 4.7% to 5.3%; Q4FY22
–increased from 5.3% to 5.8%
 Inflation projected at 5.1% for Q1FY23
88
GDP -economic Growth
•Retained GDP growth for FY22 at 9.5%
• GDP for Q1FY22 raised from 18.5% to 21.4%, Q2FY22 lowered from 7.9% to 7.3%,
Q3FY22 – increased from 7.2% to 6.3% and Q4 decreased from 6.6% to 6.1%
• GDP projected at 17.2% for Q1FY23
Jun 04, 2021
Rates
 Accommodative stance maintained
 Inflation projected for FY22 5.1%
 Q1FY22 reiterated at 5.2%; Q2FY22 increased from 5.2% to 5.4%; Q3FY22 – increased
from 4.4% to 4.7%; Q4FY22 – increased from 5.1% to 5.3%
GDP -economic Growth

• Lowered GDP growth for FY22 from – 10.5% to 9.5%
• Q1FY22 lowered from 26.2% to 18.5%, Q2FY22 lowered from 8.3% to 7.9%, Q3FY22 –
increased from 5.4% to 7.2% and Q4 increased from 6.2% to 6.6%)
89
Regulatory Action
SEBI brings in guidelines for trading by employees, trustees and board members of
AMCs
Securities and Exchange Board of India (SEBI) has introduced new set of guidelines for
trading by employees, trustees and board members of asset management companies (AMCs)
or mutual funds. It has tweaked the guidelines pertaining to 'access person' and barred senior
employees and directors of AMCs and their trustees from buying or selling mutual fund units
while having access to any non-public information, such as winding up of schemes. Also, SEBI
has stated that while mutual fund employees are mandated to refrain from profiting within 30
days of investment in securities, they can provide a suitable explanation to the compliance
officer if they have done so. Such incidence should be reported to the Board of the AMC and
the trustees at the time of review.
SEBI brings norms regarding pool accounts by Mutual Funds
SEBI has allowed mutual funds to use pool accounts only for those transactions that are
executed at mutual fund level owing to certain operational and regulatory requirements but
under certain conditions. SEBI prohibits the use of such pool accounts– trustees and AMCs are
to ensure the assets and liabilities of each scheme are segregated and ring-fenced from other
schemes of the MF, and bank accounts and securities accounts of each scheme are also
segregated and ring-fenced. The conditions include that AMCs will have internal policies
approved by their respective boards and trustees
90
SEBI brings norms for investment in Bills Rediscounting Scheme (BRDS)
With regards to Bills Re-Discounting Scheme (BRDS), SEBI has decided that the single issuer
limit and the group exposure limit shall be calculated at the issuing bank level as BRDS are
issued with recourse to the issuing bank. Also, Investment in BRDS by debt schemes of mutual
funds shall be considered as exposure to financial services sector for the purpose of sector
exposure limits
Timeline for SEBI guidelines to bring uniformity in Benchmarks of Mutual Fund

Schemes extended
SEBI has extended the timeline for following a two-tiered benchmarking structure for mutual
fund schemes from January 1, 2022, to April 1, 2022, on AMFI’s request. SEBI had decided
on a two-tiered structure to benchmark schemes for certain categories in October 2021 in order
to bring uniformity. The first-tier benchmark shall reflect scheme category and the second-tier
benchmark would indicate investment style/strategy of the fund manager within the category
Effective date for Risk Management Framework extended
In September 2021, SEBI had revised the Risk Management Framework (RMF) that was to be
effective from January 1, 2022. Given a request from AMFI, the date has been extended to
April 1, 2022. The framework will segregate mandatory elements and recommendatory
elements. Compliance with RMF will be reviewed annually by AMCs. RMF of mutual funds
will cover: Governance and Organization, Identification of Risks, Measurement and
Management of Risks, Reporting of Risks, and related information. It will also comprise of
role of management, CEO, CRO, CIO, and CXO. Additionally, the AMC should maintain risk
metric for each mutual fund scheme
91
Statement of Study -
• Most of person have gone for Fixed deposit and Equity Securities as an option for
investment and the 3rd option they choose as Mutual Fund.
• Lack of Financial awareness about Mutual fund has been seen although the equity
securities investment was chosen which is riskier option to invest.
• Fixed Deposit was also Popular option for respondents of survey which Didn’t even
beat the Inflation rate.
• Majority of Respondents were ready to invest in Equity Based Mutual Fund this may
be because of Risk Appetite and majority of them are working so they have regular
income source for investing.
• Most of people in survey says they get inefficient advice for investment this may be
because of survey was restricted to Saphale -Makunsar Region which are town and
Village Respectively.
Limitation of Study
• The data was collected from Saphale -Makunsar region to know tendency about
investment option which people choose in my residential area.so the data and
analysis is restricted to response received from Saphale-Makunsar region.
• Many information related to Mutual fund had given that may not have latest
information as updated information based on frequency consume time and due to
paucity of time its not possible to regularly update report for e.g., Mutual fund
Scheme information returns which are mentioned changes Frequently.
92
Survey Questionnaire Data Analysis
Whats Your Profession ?
While collecting data around 73.3% person who were Working professional. 20% were
students who have some knowledge about Mutual Fund and rest were retired person (Senior
Citizens).
Which Investment Vehicle you like the most ?
Many people show interest in Fixed Deposit and Equity Securities. There were some people
who were showing interest in Mutual Fund and Government securities. There were very few
people who were ready to invest in Debt Securities this may because of majority of people
were of young age and working professionals.
93
In this highly volatile market, do you think Mutual Funds are a destination for Investments?
60% people thinks that Mutual fund Investment can be an investment option, 26.7% people
were not sure about investment in mutual fund and 13.3% people think it is not good to invest
in Mutual Fund at the highly Volatile Market.
Which Mutual Fund Plan do you consider the best?
53.3% people choose to invest in Equity based mutual fund plan, 20% choose Balance Fund,
other 20% choose Debt Plan and remaining person have not invested in Mutual Fund.
94
Which end-scheme do you feel is good?
Majority of People i.e., 73.3% feels to invest in Open Ended scheme and rest 26.7% feels to
invest in close Ended Fund.
Which are the primary sources of your knowledge about Mutual Funds as an investment
option?
Blue color represents Students,

Red color represents working Professional
Yellow color represents Retired person.
The above diagram represents about how Television, social media, sales Representative,
Friends/Relatives play role while gaining knowledge about Mutual Fund.
95
Blue color represents Students,
Red color represents working Professional
Yellow color represents Retired person.
The above diagram gives details about how Brand Image, liquidity Preference, Professional
Management, Diversification, and High Return plays role in making decision about Mutual
Fund.
How long would you like to hold your Mutual Funds' Investments?
Around 53.3% respondents choose to invest for 5 to 10 years, 40% choose to invest for 3 to
5 years and 6.7% choose to invest for 1 year period.
96
Which factors prevent you to invest in mutual fund?
The most important factors prevent you to invest in mutual fund in the survey was Inefficient
investment advisor, many of respondents have chosen this because commission or target to
the investment advisor by their firm.
97
Resources to study about Mutual Fund:
https://www.amfiindia.com/
To get help regarding Mutual Fund Investment in India
www.ici.org
(Investment Company Institute). Provides educational and reference materials for individuals
seeking information about mutual funds.
www.investing.rutgers/edu
(Source of Investing for Your Future), An 11-unit Cooperative Extension home study course
for new investors.
Many more websites are available including Mobile Applications which are convenient way
of Investing and tracking investment.
98
Glossary
• 12b-1 Fees—fees paid out of mutual fund or ETF assets to cover the costs of marketing
and selling mutual fund shares and sometimes to cover the costs of providing shareholder
services.
• Asset Management Company (AMC)-

Asset Management Company is the Investment Manager of the Mutual Fund that manages the
pool of investor money on behalf of the investors
• Assets Under Management (AUM) -

Assets Under Management (AUM) is the total market value of the investments (assets) that an
asset management company is managing, on behalf of its investors.
• Credit risk –
In any payment, there are two parties where one party owes money to the other party. When
the payment is not immediate but is supposed to happen in the future, there is a contractual
agreement between the two parties. The borrower is supposed to fulfill its payment obligation
at some time in the future. The lender being the counterparty faces a risk, that the borrower
may not be in a suitable position to return its money back or pay the periodic future interest
payments for a variety of reasons. This risk faced by the lender, that the borrower may fail to
keep its promise of payment in the future is called Credit Risk.
• Benchmark-
The performance of a Mutual Fund or any investment should be evaluated against a standard
known as the benchmark.
99
References
• https://www.mutualfundindia.com/Images/Research/PdfPaths/0ad9f17d1b494a0b9d0
23e7b8eda0811Mutual%20Fund%20Screener%20-%20December%202021.pdf
• Khaladkar, Manisha & Harshad, Mr. (2019). THE ANALYSIS OF MUTUAL FUND'S
PERFORMANCE. 10.13140/RG.2.2.24519.11689.
• https://www.sebi.gov.in/sebi_data/docfiles/20616_t.html
• https://www.principalindia.com/new-investor-basics/types-of-mutual-fund-schemes
• https://scripbox.com/mf/what-is-mutual-fund/
• https://www.livemint.com/mutual-fund/mf-news/mutual-funds-add-more-than-81-
lakh-investor-accounts-in-202021-11619329011346.html
• https://www.forbes.com/advisor/in/investing/10-mistakes-investors-make-while-
investing-in-mutual-funds/
• https://issuu.com/sanjaykumarguptaa/docs/mutual-funds-and-their-investment-options
• https://www.researchgate.net/publication/344187632_THE_ANALYSIS_OF_MUTU
AL_FUND'S_PERFORMANCE
• https://scripbox.com/mutual-fund/best-mutual-funds
• https://www.sec.gov/investor/pubs/sec-guide-to-mutual-funds.pdf
• https://www.fincash.com/l/structure-mutual-funds
• https://www.valueresearchonline.com
• https://www.dspim.com/learn/articles/mutual-fund-intermediate/what-are-the-
advantages-of-seeking-professional-advice
• https://www.sebi.gov.in/sebi_data/DRG_Study/OpportunitiesChallenges.pdf
100

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A

“MUTUAL FUND AS AN INVESTMENT OPTION”

Submitted in partial fulfilment of the requirement for the award of

Aakash Deepak Gawade

(Masters in Management Studies 2023-24)

Under the Guidance of

Dr. Abhiraj Shivdas

Alkesh Dinesh Mody Institute for Financial and Management Studies

MMS Coordinator Director

Prof Naina Salve Dr Smita Shukla

Internal Guide External Examiner

I, Mr./Ms. Aakash Gawade SYMMS Student of Alkesh Dinesh Mody Institute

Aakash Deepak Gawade

Sr. No Particulars Page No

2 Objective of Study and Research Methodology 8

5 International history of Mutual fund 13

6 Mutual Funds in India 14

7 Process of Mutual Fund Working 18

8 Structure Of Mutual Fund 21

9 Regulatory structure of Mutual fund 24

10 Evolution of Mutual Fund Industry in India 27

11 Factors to be considered while Selecting Mutual Fund 30

13 How to choose best Mutual fund scheme 38

14 List of Some Top Mutual Funds Scheme 43

15 Mutual Funds Scheme according to Maturity 54

17 Registration process to Investment 62

19 Features studied by investors In Mutual Fund 71

20 When are Mutual Fund considered a Bad Investment? 78

21 Mutual fund Recent Updates 80

23 Statement of study and Limitation 92

24 Survey Questions and Data Analysis 93

25 Resources to Study About Mutual Fund 98

o Buying Mutual Funds

o Systematic Investment Plan

The Fund Sponsor

Rights and Roles of Trustees‐

Fund Managers (The Asset Management Company)

Mutual Funds can be structured in the following ways:

Regulatory jurisdiction of SEBI:

Regulatory jurisdiction of RBI:

Role of Ministry of Finance in Mutual Fund:

Role of Companies Act in Mutual Fund:

4) Growth and SEBI Regulation - 1996-2004

5) Growth and Consolidation - 2004

1) Investment Objective – Investment objective refers to an investor’s financial goal which

1Year-3Year Short Duration Fund

Time Horizon/Risk Low Risk Medium Risk High Risk

a) Performance against Benchmark

b) Performance against Category

e) AMC Track Record

f) Assets Under Management (AUM)

Looking Beyond a Mutual Fund or ETF Name

■ Prospectus and Summary Prospectus

Identifying Goals and Risk Tolerance-

Style and Fund Type-

Fees And Load Charges-

Passive vs. Active Management-

Size of the Fund-

Selecting What Really Matters -

Axis Blue chip Fund

Fund Name 1year return(in%) 3year return(in%) 5-year return(in%)

Assets: ₹ 34,182 Cr (As on 31-Jan-

Expense: 1.61% (As on 31-Jan-2022)