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PROJECT GUIDE : Kamlesh D Vala

SUBMITTED BY : Vikas C Parmar Enrolment No : 122611951


1. INTRODUCTION OF THE TOPIC Meaning of Investment In simple terms, Investment refers to purchase of financial assets. While Investment Goods are those goods, which are used for further production.

Investment implies the production of new capital goods, plants and equipments. John Keynes refers investment as real investment and not financial investment. Investment is a conscious act of an individual or any entity that involves deployment of money (cash) in securities or assets issued by any financial institution with a view to obtain the target returns over a specified period of time. Target returns on an investment include: 1. Increase in the value of the securities or asset, and/or 2. Regular income must be available from the securities or asset. Types of Investment A particular investor normally determines the investment types after having formulated the investment decision, which is termed as capital budgeting in financial lexicon. With the proliferation of financial markets there are more options for investment types. According to the financial terminology investment means the following: 

Purchasing Securities in Money or Capital Markets.



Buying Monetary or Paper Financial Assets in Money or Capital Markets.


Investing in Liquid Assets like Gold, Real Estate and Collectibles.

Investors assume that these forms of investment would furnish them with some revenue by way of positive cash flow. These assets can also affect the particular investor positively or negatively depending on the alterations in their respective values. Investments are often made through the intermediaries who use money taken from individuals to invest. Consequently the individuals are regarded as having claims on the particular intermediary. It is common practice for the particular intermediaries to have separate legal procedures of their own. Types of Investment : Capital Investment , Equity Investment, Land As Investment, Stock Investment, Retirement Investment Planning , Financial Market Investment , Share Market Investment , Portfolio Investment






Real Estate Investment.

Following are some intermediaries:







Banks Mutual Funds ,Pension Funds , Insurance Companies , Collective Investment Schemes Investment Clubs Investment in the domain of personal finance signifies funds employed in the purchasing of shares, investing in collective investment plans or even purchasing an asset with an element of capital risk. In the field of real estate, investments imply buying of property with the sole purpose of generating income. Investment in residential real estate could be made in the form of buying housing property, while investments in commercial real estate is made by owning commercial property for corporate purposes that are geared to generate some amount of revenue. Advantages of mutual funds Mutual funds have advantages compared to direct investing in individual securities. These include: •


Ability to redeem daily at net asset value (the value of a proportional share of the fund's assets)

Professional investment management

Ability to participate in investments that may be available only to larger investors

Government regulation

Disadvantages of mutual funds Mutual funds have disadvantages as well, which include: •


Less control over timing of recognition of gains and losses

Less predictable income

No opportunity to customize 5


2. RATIONAL OF STUDY A mutual fund is registered with the Securities and Exchange Commission (SEC) and is overseen by a board of directors (if organized as a corporation) or board of trustees (if amazed as a trust). The board is charged with ensuring that the fund is managed in the best interests of the fund's investors and with hiring the fund manager and other service providers to the fund. The fund manager also known as the fund sponsor or fund management company, trades (buys and sells) the fund's investments in accordance with the fund's investment objective. A fund manager must be a registered investment advisor. Funds that are managed by the same fund manager and that have the same brand name are known as a "fund family" or "fund complex". Personal finance discipline demands every individual to plan for expenditure and savings against current income. While moving up in the hierarchy of needs, one must simultaneously save money for future. As one goes on in life, the standard of living rises, needs increases and the expenditure to meet those needs also increases. Without proper financial planning the future can be a miserable struggle to meet these demands. Role of financial system is to enthuse economic development. As investors are getting more educated, aware and prudent, they look for innovative investment instruments so that they are able to reduce investment risk, minimize transaction costs and maximize returns along with certain level of convenience. As a result there has been advent of numerous innovative financial instruments such as bonds, company deposits, insurance and mutual funds. Mutual funds score over all other investment options in terms of safety, liquidity, and returns and are as transparent, convenient as it can get. Goal of mutual fund is to provide an efficient way to make money. Different mutual funds have different risks, which differ because of the fund’s goal, fund managers and investment styles. The investment experts who invest the pooled money on behalf of investors of the scheme are known as Fund Managers. These fund managers take the investment decisions pertaining to the selection of securities and the proportion of investments to be made into them. The following Diagram shows the concept of Mutual fund


WHY MUTUAL FUNDS NEEDED? Mutual Funds are becoming a very popular form of investment characterized by many advantages that they share with other forms of investments and what they possess uniquely themselves. The primary objectives of an investment proposal would fit into one or combination of the two broad categories, i.e., Income and Capital gains. How mutual fund is expected to be over and above an individual in achieving the two said objectives, is what attracts investors toopt for mutual funds. Mutual fund route offers several important advantages. Diversification: A proven principle of sound investment is that of diversification, which is the idea of not putting all your eggs in one basket. By investing in many companies the mutual funds can protect themselves from unexpected drop in values of some shares. The small investors can achieve wide diversification on his own because of many reasons, mainly funds at his disposal. Mutual funds on the other hand, pool funds of lakhs of investors and thus can participate in a large basket of shares of many different companies. Majority of people consider diversification as the major strength of mutual funds. Expertise Supervision: Making investments is not a full time assignment of investors. So they hardly have a professional attitude towards their investment. When investors buy mutual fund scheme, an essential benefit one acquires is expert management of the money he puts in the fund. The professional fund managers who supervise fund’s portfolio take desirable decisions viz., what scrip’s are to be bought, what investments are to be sold and more appropriate decision as to timings of such buy and sell. They have extensive research facilities at their disposal, can 8

spend full time to investigate and can give the fund a constant supervision. The performance of mutual fund schemes, of course, depends on the quality of fund managers employed. Liquidity of Investment: A distinct advantage of a mutual fund over other investments is that there is always a market for its unit/ shares. Moreover, Securities and Exchange Board of India (SEBI) requires the mutual funds in India have to ensure liquidity. Mutual funds units can either be sold in the share market as SEBI has made it obligatory for closed-ended schemes to list themselves on stock exchanges. For open-ended schemes investors can always approach the fund for repurchase at net asset value (NAV) of the scheme. Such repurchase price and NAV is advertised in newspaper for the convenience of investors. Reduced risks: Risk in investment is as to recovery of the principal amount and as to return on it. Mutual fund investments on both fronts provide a comfortable situation for investors. The expert supervision, diversification and liquidity of units ensured in mutual funds reduces the risks. Investors are no longer expected to come to grief by falling prey to misleading and motivating ‘headline’ leads and tips, if they invest in mutual funds. Safety of Investment: Besides depending on the expert supervision of fund managers, the legislation in a country (like SEBI in India) also provides for the safety of investments. Mutual funds have to broadly follow the laid down provisions for their regulations, SEBI acts as a watchdog and attempts whole heatedly to safeguard investor’s interests. Tax Shelter: Depending on the scheme of mutual funds, tax shelter is also available. As per the Union Budget-2003, income earned through dividends from mutual funds is 100% tax free at the hands of the investors. Minimize Operating Costs: Mutual funds having large invisible funds at their disposal avail economies of scale. The brokerage fee or trading commission may be reduced substantially. The reduced operating costs obviously increase the income available for investors. Investing in securities through mutual funds has many advantages like – option to reinvest dividends, strong possibility of capital appreciation, regular returns, etc. Mutual funds are also relevant in national 9

interest. The test of their economic efficiency as financial intermediary lies in the extent to which they are able to mobilize additional savings and channeling to more productive sectors of the economy. RISKS EMBEDDED IN MUTUAL FUND INVESTMENTS The Risk Return Trade-Off The most important relationship to understand is the risk-return trade-off. Higher the risk greater the returns/loss and lower the risk lesser the returns/loss. Hence, it is up to the investor to decide how much risk he is willing to take. In order to do this one must first be aware of the different types of risks involved with his investment decision. Political/ government Policy Risk Changes in government policy and political decision especially with regard to the tax benefits may impact the business prospects of the companies leading to an impact on the investments made by the fund. They can create a favorable environment for investment or vice-versa. Therefore, stable monetary and fiscal policies are crucial to sustain a propitious investment environment. Liquidity Risk Liquidity risk arises when it becomes difficult to sell the securities that one has purchased. Liquidity Risk can be partly mitigated by diversification, staggering of maturities as well as internal risk controls that lean towards purchase of liquid securities. Effect of Loss of Key Professionals and Inability to Adapt An industries' key asset is often the personnel who run the business i.e. intellectual properties of the key employees of the respective companies. Given the ever-changing complexion of few industries and the high obsolescence levels, availability of qualified, trained and motivated personnel is very critical for the success of industries in few sectors. It is, therefore, necessary to attract key personnel and also to retain them to meet the changing environment and challenges


the sector offers. Failure or inability to attract/retain such qualified key personnel may impact the prospects of the companies in the particular sector in which the fund invests. Exchange Risks A number of companies generate revenues in foreign currencies and may have investments or expenses also denominated in foreign currencies. Changes in exchange rates may, therefore, have a positive or negative impact on companies which in turn would have an effect on the investment of the fund. Investment Risk The sectoral fund schemes, investments will be predominantly in equities of select companies in the particular sectors. Accordingly, the NAV of the schemes are linked to the equity performance of such companies and may be more volatile than a more diversified portfolio of equities. Risk Tolerance Typically, risk is defined as short-term price variability. But on a long-term basis, risk is the possibility that one’s accumulated real capital will be insufficient to meet his financial goals. Individual tolerance for risk varies, creating a distinct "investment personality" for each investor. Some investors can accept short-term volatility with ease, others with near panic. So whether one’s investment temperament is conservative, moderate or aggressive, one needs to focus on how comfortable or uncomfortable he will be as the value of his investment moves up or down.


3. OBJECTIVE OF THE STUDY Objective of this study is to analyze the Past Performance of the various Mutual Funds Schemes on the Basis of their Historical NAV’s and application of statistical tools on the same in Vadodara market . This helps in understanding the customer's perception about performance of mutual fund schemes in terms of both risk as well as return involved at Vadodara market. So following are the specific objective of the study. Professional objective : 

To explore the important aspects of Mutual Funds affecting the perception of mutual fund investors.

To find out the market risk of mutual fund in various plans.

To examine the difference of perception of large and small mutual fund investors on the basis of the explored aspects of mutual funds.

To know the investment pattern of the investors in different schemes.

The benefits made from the investment on the different schemes.

To know the diversify portfolio of Mutual Fund.

Personal Objective 

Formulate an integrative business project through the application of multidisciplinary knowledge

Identify problems, define objectives collect and analyze information, evaluate risks and alternatives, and leverage technology to enable qualitative and quantitative methods to solve problems


5. RESEARCH METHODOLOGY METHODOLOGY: This study is mainly based on the primary data. Secondary data is only used for the development of the research framework. A structured questionnaire is used as the main tool for data collection about the consumer’s perception regarding the mutual funds. 1. Research Design: A research design is a pattern or an outline of a research project’s working. It is a statement of only the essential element of a study, those that provide the basic guidelines for the details of the project. It comprises a series of prior decision that taken together provide master plans for executing a research projects. 2. Sources of Data: 

Primary Source:

The primary data will be collected using sampling method and by survey using questionnaire. 

Secondary Source:

Secondary data includes information regarding present market scenario, Information regarding Mutual Funds and competitors are collected by internet, Magazines and Newspaper and books. 3. Sample Planning: 

Sample Size: 35 to 40 units.

Sample Extent: Vadodara city.

4. Type of information: 

I will collect facts, awareness, attitude, future action plan and reason using questionnaire.

My criteria for collection is Gender Wise , Age wise , Income group wise etc.

5. Type of questions: 

Close ended questions for dichotomous.

Multiple choice type

6. Data Analysis using Statistical Tools and Interpretation: Chi Square Test for Association Three hypotheses were made in this study and hypothesis testing was done using Chi square. Both hypotheses were tested with 95% confidence level i.e. at 5% significant level 13

6. LIMITATIONS OF THE STUDY As the study is based on primary and secondary data, the inherent limitation of the secondary data would have affected the study. 1.

The sample size chosen is covered only a small portion of the whole population of various scheme of Vadodara city.


Past performance may not guarantee the future return.


Micro level data have been taken in analysis; Macro level data may affect the returns.


Only educated group is targeted here.


Convenience sampling used here has its own limitations


There have been some inaccuracies due to non – cooperative and rude behavior of the respondents.


Since this is single city analysis , so national level view can't to obtained.

Data collected cannot be asserted to the free from errors, as the sample size restricted to the employees. This study need to be interpreted carefully. They can provide clues to the company’s performance or financial situation. But on their own, they cannot show whether performance is good or bad. It requires some quantitative information for an informed analysis to be made.

























A survey on investors (parma) 1  


A survey on investors (parma) 1