Mutual Funds as an Investment Option: A

study of Finance Professional and Others

By Vandana KhatriMBA IV SEMESTER

GGITS, JBP

What is Mutual Fund?

• A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal.

• Or a mutual fund is a professionally-managed firm of collective investments that pools money from many investors

and invests it in stocks, bonds, short-term money market instruments, and/or other securities.

• The SEBI regulations, 1993 defines a mutual fund as “a fund in the form of a trust by a sponsor, to raise money by the trustees

trough the sale of units to the public, under one or more schemes, for investing in securities in accordance with these

regulations”

EMERGENCE OF MUTUAL FUND IN INDIA

Mutual funds in India began in 1964 Unit Trust of India (UTI) was the first Remains the market leader even today Having about 68% of the market share Lost monopoly in 1987 With entry of public sector mutual funds Promoted by public sector banks » and insurance companies Industry was open to foreign institutions in

1993 Real competitive structure began only then

FIRST PHASE-1964-87

Unit trust of India was established on 1963 by an Act of Parliament.

The first scheme launched by UTI was unit Scheme in 1964

In 1978, UTI was de-linked from the RBI and IDBI took over the regulatory and administrative control in place of

RBI

At the end of 1988 UTI had Rs,6700 crores of assets under management

SECOND PHASE -1987-1993

SBI Mutual fund was the first followed by Can bank Mutual Fund (Dec1987)

PnB Mutual Fund (Aug 1989)

Bank of India(Jun1990),LIC in 1989 and GIC in 1990

Bank of Baroda Mutual Fund (Oct 1992)

The end of 1993 marked Rs.47004 a assets under management

Third Phase-1993-2003 Entry of Pvt. Sector Funds

A new era started in the Indian mutual fund industry, with the entry of pvt sector funds from

1993

The erstwhile Kothari Pioneer(now emerged with Franklin Templeton ) was the first pvt sector mf

registered in July 1993.

At the end of January 2003,there were 33 mutual fund with total assets of Rs.121805 crores.

Fourth Phase-since Feb 2003

This phase had bitter experience of UTI. It was bifurcated into two separate entities. One is the

specified Undertaking of the UTI of Rs.29835 crores.

The 2nd is UTI Mutual Fund Ltd, sponsored by SBI, PnB, BOB, LIC

With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76000crores and the

setting up a UTI mutual fund

MUTUAL FUND OPERATION FLOW CHART

ADVANTAGES OF MUTUAL FUND

Mobilizing small savingsProfessional ManagementDiversified InvestmentBetter LiquidityReduced RiskSwitching FacilityTax benefitsLow Transaction CostConvenience

DISADVANTAGE OF MUTUAL FUNDS

No guaranteesFees and CommissionsManagement Risks

Research design

Objective – To know the awareness level of mutual funds as investment option

Sample Size– 40 Tools Used – QuestionnaireSampling Technique – Convenient Sampling

Technique

FINDINGS: The investors give more preference to regular income funds besides the

considerations of a) Diversified Equity b) Tax Saving Schemes. Thus if the government encourages the investment in mutual funds in the

current budget, then more people will be investing in the MFs for tax saving. However people are also not compliant to risk aversion. They are willing to invest in risky equity funds.

Another significant finding of the project is that investors are lured by the returns MFs are showing. However at the same time they also want to minimize their risk.

Investors desire or opt open-ended schemes than close-ended schemes. This means that they want flexibility in the inflow and outflow of their funds.

The source of information the investors most rely is on advertisement. However they also require the detailed information, which they take from Financial Advisors. On other sources the investors are quite apprehensive.

Recommendations:

There is lack of awareness among people about mutual funds so there should be more advertising and other promotional campaigns to make them aware.

People are more interested in investing in equity funds rather than debt funds because companies are promoting more for equity funds. Companies should equally promote debt funds also as the provide security to customers.

Companies should give knowledge to its customer about its computerized operations to save their time and to make the operations easier.

ConclusionFinance Professional

These people have good knowledge of mutual funds and invest in schemes because of less risk and professional Management. Generally they choose open ended scheme over close ended but these are also interested in investing in other areas like gold, real state, shares etc.

Others ( Non Finance Professional)

These persons are risk averse and like to invest in safe zones like fixed deposit or govt. security, they have limited knowledge of mutual funds and sometimes they go for close ended scheme because of future liabilities like marriage or education of children.

Thank you