25-08-2017, 09:32 PM
MUTUAL FUND
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INTRODUCTION
Mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. This pool of money is invested in accordance with a stated objective. The joint ownership of the fund is thus “Mutual”, i.e. the fund belongs to all investors. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. A Mutual Fund is an investment tool that allows small investors access to a well-diversified portfolio of equities, bonds and other securities. Each shareholder participates in the gain or loss of the fund. Units are issued and can be redeemed as needed. The funds Net Asset value (NAV) is determined each day.
ADVANTAGES OF MUTUAL FUND
Professional Management - The basic advantage of funds is that, they are professional managed, by well qualified professional. Investors purchase funds because they do not have the time or the expertise to manage their own portfolio. A mutual fund is considered to be relatively less expensive way to make and monitor their investments.
Diversification - Purchasing units in a mutual fund instead of buying individual stocks or bonds, the investors risk is spread out and minimized up to certain extent. The idea behind diversification is to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others.
Economies of Scale - Mutual fund buy and sell large amounts of securities at a time, thus help to reducing transaction costs, and help to bring down the average cost of the unit for their investors.
Liquidity - Just like an individual stock, mutual fund also allows investors to liquidate their holdings as and when they want.
5. Simplicity - Investments in mutual fund is considered to be easy, compare to other available instruments in the market, and the minimum investment is small. Most AMC also have automatic purchase plans whereby as little as Rs. 2000, where SIP start with just Rs.50 per month basis.
HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY
The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank. Though the growth was slow, but it accelerated from the year 1987.
The mutual fund industry can be broadly put into four phases according to the development of the sector.
Second Phase – 1987-1993
SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92)
Third Phase – 1993-2003
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores.
Based on their structure
Investors can buy and sell the units from the fund, at any point of time.
Close-ended funds
These funds raise money from investors only once. Therefore, after the offer period, fresh investments can not be made into the fund. If the fund is listed on a stocks exchange the units can be traded like stocks. Therefore, such funds have relatively low liquidity
Scope of the study
The research was carried on in Tangra (Amritsar). I had been sent at one of the branch of State Bank of India Tangra (Amritsar) where I completed my Project work. I surveyed on my Project Topic “A study of preferences of the Investors for investment in Mutual Fund” on the visiting customers of the SBI Tangra (Amritsar) Branch.
The study will help to know the preferences of the customers, which company, portfolio, mode of investment, option for getting return and so on they prefer. This project report may help the company to make further planning and strategy.
Conclusion
Mutual fund is very good for people who have less knowledge of stock market or who don’t have enough time to keep a regular check on the market. Mutual Funds are managed by professionals, so investor doesn’t need to take any tension about his/her money. Selling MF is a tough task as the product is intangible and the investor doesn’t get anything tangible for the money he pays except an acknowledgement. Though Mutual Funds are popular but still there is a large number market who have no idea of mutual funds because awareness of mutual fund is less compared to life insurance and FDs.
Mutual Fund is a service industry so it is very important for the company to provide good service and make sure it is at par with its competitors. Eg. — easy process of investment and redemption, keeping investors updated with NAVs through email or statements etc.
SBI MF has a good name in the mutual Fund industry because of the name SBI attached to it, since SBI is one of the oldest and biggest banks of India so it has a big hand in spreading awareness of SBI MF.