MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Table of Content
1. Abstract……………………………………………………………………………………..5
2. Objective…………………………………………………………………………………….6
3. Standard Chartered Bank………………………………………………………..7
4. Investments………………………………….………………………………………..13
5. Survey Analysis……………………………..……………………………………...25
6. Savings Account…………………………..…………………………………….….34
7. ULIP………………………………………………….……………………………….…….36
8. Mutual Funds………………………………………………………………….……..46
9. Taxation in India…………………….…………………………………….……….65
10.Trend of Stocks…………………….….………………………………….…………75
11.Annexures I……………………………….…………………………………………….79
12.Annexure II…………………………………………………………..…………………80
13.Annexure III…………………………………………………………………………….82
14.Conclusion…………………………….……………………………………………….84.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
ABSTRACT
The Project includes the study of the products available in the market like
 Mutual Funds
 Saving account
 ULIP
 Taxation in India
 The stocks available in the market.
To analyze the features of these products, there advantages etc.
A Survey was conducted to gain the primary data to judge the investors
facet before investing in any of the investment tools and thus to scrutinize
the important aspects for the investors before investing that further helped
in analyzing the relation between the features of the products and the
investor’s requirements.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
OBJECTIVE
The Objective of the Report is to map the information required to assess
1. Knowledge and a profound understanding of the products like ULIP,
Saving accounts, mutual funds about taxation in India.
2. Study various aspects to analyze the Performance of the Products.
3. To study various provisos  Prediction of the investor’s outlook.
 To realize the vital facet to glance on before investing in a
Scheme.
i.e. - Individual Risk Tolerance, Investing capacity, Relation
among investors demographic property, age, Job etc. with their
investing point of view.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
STANDARD CHARTERED BANK
Leading the way in Asia, Africa and the Middle East
In its unique position as an international bank with strong franchise,
Standard Chartered combines an in-depth knowledge of local markets with
global product expertise to offer effective financial solutions. The bank
capitalises on its onshore presence across Asia, Africa and the Middle East to
offer customers convenient and reliable access to the widest range of
currency markets, to date local market information, country-specific global
risk management strategies, and customised capital raising and liquidity
management solution.
With 150 years of emerging market experience, our in-depth understanding
of the local market is unrivaled by most other financial institutions,
especially in the currencies of Asia, the Middle East and Africa. We are able
to meet the needs of local corporates, multinational companies,
development organisations, investment and financial institutions, and central
banks around the world.
Understanding that each customer's needs are unique, Standard Chartered
customises Client Solutions for risk management, yield enhancement,
liquidity management and debt financing:









Structured yield enhancement products to match risk appetites and
investment requirements
Solutions for currency and interest rate exposures
Access to more than 100 onshore and offshore illiquid and restricted
currencies
US Dollar Liquidity Fund for effective cash management
Local currency and G3 currency fixed income and loan syndications
Asset Securitisation
Structured trade and export financing for importers and exporters
Project financing services
Corporate advisory services
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Features
 International Network, Local Presence
With an international
network which spans the major financial centres (New York, London,
Hong Kong and Singapore) and the world's emerging markets (India,
the Middle East, Africa), we are uniquely placed to meet our
customers' needs wherever they are in the world.

Innovative Client Solutions
We leverage a global perspective to
develop creative and effective financial solutions based on our in-depth
local market knowledge and understanding of our customers' needs.
 One-Stop Range of Products and Services
We have a full range of
foreign exchange and risk management solutions to meet the needs of
clients across the world.
Standard Chartered Bank in India
Standard Chartered Bank is the largest international banking Group in India
with 78 branches in 30 cities. The Bank is having a combined customer base
of 2.5 million in retail banking and over 1200 corporate customers.
The key businesses of Standard Chartered Bank in India include consumer
banking - primarily credit cards, mortgages, personal loans and wealth
management - and - wholesale banking, where the Bank specializes in the
provision of cash management, trade, finance, treasury and custody
services.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Standard Chartered was the first to issue global credit card in India, the first
to issue Photocard, the first Picture Card and was the first credit card issuer
to be awarded the ISO 9002 certification.
Some other product innovations of Standard Chartered Bank in India include
the 'Sapnay' credit card, the international debit card that provides free
access to over 1500 Visa ATM's, a first in the banking industry, Mileage, an
overdraft facility against the security of a car and Smart Credit, a personal
line of credit for sa;aried customers.
The name is derived from Standard & Chartered. Standard Bank of British
South Africa merged with Chartered Bank of India, Australia and China in
1969. Chartered Bank opened its first overseas branch in India, at Kolkata,
on 12 April 1858. During that time Kolkata was the most important
commercial city and was the hub of jute and indigo trades. The merger with
the Standard Bank of British South Africa in 1969 and the acquisition of
Grindlays Bank in 2000 were two key events that have played an important
role in making the Bank the largest international bank in India.
MORE THAN BANKING:
Corporate Social Responsibility (CSR) is at the core of the values of Standard
Chartered
Bank.
The
Bank
is
committed
to
the
communities
and
environments in which it operates. The Bank strongly supports the trend
towards
delivering
shareholder
value
in
a
socially,
ethically
and
environmentally responsible manner. ‘Living with HIV’ is a global community
initiat ive of Standard Chartered that is aimed at raising awareness of
HIV/AIDS amongst employees through workshops and amongst stakeholders
by providing thought leadership. Under ‘Seeing is believing’, a programme
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
that aims to restore sight to one million people globally by 2006, the Bank
has raised funds to help 8000 people to see.
In partnership with Sight Savers International and VISION2020 the Bank is
now involved in two flagship projects at Vishakhapatnam and Muzaffarpur,
both aimed at the elimination avoidable blindness. Furthermore, in support
of the communities ravaged by the Asian Tsunami Crisis in 2004 the
Standard Chartered Group committed US$ 1 million to India. The Bank is
utilizing these funds for the rehabilitation of two villages adopted near
Chennai.
In
2004,
Standard
Chartered
initiated
the
phenomenally
successful
Standard Chartered Mumbai Marathon - an event dedicated to charity fund
raising. The two marathons held so far have forged partnerships with
customers and charities and deepened the Bank’s ties with the community,
with over US$ 1 million being raised in 2005.
PRODUCTS OFFERED
Standard Chartered bank provides different products and services in order to
cater the needs of the customers which can be broadly classified into the
following categories:
1. PERSONAL BANKING: To cater the diverse financial needs, Standard
Chartered offers a wide range of premium banking products and
services through its network of 81 branches in 31 cities across the
country.As a privileged customer of this bank, the customers can
always be assured of a banking service that is flexible enough to tailormake a product suite to take care of his specific banking needs.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
2. SME BANKING: SME Banking provides integrated financial solutions
to small and medium businesses, through a relationship management
approach. Its customer focused product offerings include working
capital
finance,
trade
services,
foreign
exchange,
and
cash
management.
3. COMMERCIAL BANKING: Standard Chartered has maintained a long
local presence, since 1858, with particular emphasis on relationship
banking. Significant networks have been established with vendors and
financial-related organisations to enable it to offer the customers a
comprehensive range of flexible financial services, with special focus
on transactional banking products. Supported by state-of-the-art
operations, Standard Chartered is pro-active in improving every part
of services. Electronic Delivery system has been put in place to ensure
that transactions are handled speedily. It has its Cash Product
Specialists and dedicated Customer Service Centres to provide its
customers with effective solutions.
In the project, I studied the products offered by the Standard Chartered
bank, its features, functions, scope and working. Thereby to understand the
workings and functions of Standard Chartered Bank, the scope of this project
has been limited to the detailed study of only three products offered by this
bank under the above mentioned categories:
1. Savings Account.
2. Unit Linked Insurance Plan (ULIP).
3. Mutual Funds.
4. Taxation in India.
5. Stock Trends.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
INVESTMENTS
Savings form an important part of the economy of any nation. With the
savings invested in various options available to the people, the money acts
as the driver for growth of the country. Indian financial scene too presents a
plethora of avenues to the investors. Though certainly not the best or
deepest of markets in the world, it has reasonable options for an ordinary
man to invest his savings.
Investments, unlike works of art, cannot afford the luxury of experimenting.
Investing is not guesswork. It takes more than just a 'tip', it needs training
to plan, instinct to pick and sheer intellect to make it work for the investor.
Human nature is fickle, his wants keep changing.
An investment can be described as perfect if it satisfies all the needs of all
investors. So, the starting point in searching for the perfect investment
would be to examine investor needs. If all those needs are met by the
investment, then that investment can be termed the perfect investment.
Most investors and advisors spend a great deal of time understanding the
merits of the thousands of investments available in India. Little time,
however, is spent understanding the needs of the investor and ensuring that
the most appropriate investments are selected for him.
The Investment Needs of an Investor
The investment needs of an investor are simply his lifestyle needs converted
into financial terms. These include
the
normal
living
expenses,
accommodation, food, as well as education, health, recreation, transport,
special occasions like marriages, festivals etc. These needs are defined not
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
only in current terms but also over the rest of the life. These needs tend to
remain the same over the years. It is the current lifestyle and the lifestyle
desired
in
future
that
determines
the
attitude
of
investor
towards
investments.
By and large, most investors have eight common needs from their
investments: 1. Security of Original Capital; 2. Wealth Accumulation; 3.
Comfort Factor; 4. Tax Efficiency; 5. Life Cover; 6. Income; 7. Simplicity; 8.
Ease of Withdrawal; 9. Communication.

Security of original capital: The chance of losing some capital has
been a primary need. This is perhaps the strongest need among
investors in India, who have suffered regularly due to failures of the
financial system.

Wealth accumulation: This is largely a factor of investment
performance, including both short-term performance of an investment
and long-term performance of a portfolio. Wealth accumulation is the
ultimate measure of the success of an investment decision.

Comfort factor: This refers to the peace of mind associated with an
investment. Avoiding discomfort is probably a greater need than
receiving comfort. Reputation plays an important part in delivering the
comfort factor.

Tax efficiency: Legitimate reduction in the amount of tax payable is
an important part of the Indian psyche. Every rupee saved in taxes
goes towards wealth accumulation.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES

Life Cover: Many investors look for investments that offer good return
with adequate life cover to manage the situations in case of any
eventualities.

Income: This refers to money distributed at intervals by an
investment, which are usually used by the investor for meeting regular
expenses. Income needs tend to be fairly constant because they are
related to lifestyle and are well understood by investors.

Simplicity: Investment instruments are complex, but investors need
to understand what is being done with their money. A planner should
also deliver simplicity to investors.

Ease of withdrawal: This refers to the ability to invest long term but
withdraw funds when desired. This is strongly linked to a sense of
ownership. It is normally triggered by a need to spend capital, change
investments or cater to changes in other needs. Access to a long-term
investment at short notice can only be had at a substantial cost.

Communication: This refers to informing and educating investors
about the purpose and progress of their investments. The need to
communicate increases when investments are threatened.
The Ideal Investment strategy should be a customized one for each investor
depending on his risk-return profile, his satisfaction level, his income, and
his expectations. Accurate planning gives accurate results. And for that there
must be an efficient and trustworthy roadmap to achieve the ultimate goal of
wealth maximization.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Investment Planning
Investment Planning involves identifying your financial goals throughout
your life, and prioritising them. Investment Planning is important because it
helps in deriving the maximum benefit from the investments.
Success as an investor depends upon ability to choose the right investment
options. This, in turn, depends on the requirements, needs and goals. For
most investors, however, the three prime criteria of evaluating any
investment option are liquidity, safety and return.
Investment Planning also helps to decide upon the right investment
strategy. Besides individual requirement, investment strategy would also
depend upon age, personal circumstances and risk appetite. These aspects
are typically taken care of during investment planning.
Investment Planning also helps in striking a balance between risk and
returns. By prudent planning, it is possible to arrive at an optimal mix of risk
and returns that suits particular needs and requirements.
Investment means putting the money to work to earn more money. Done
wisely, it can help you meet financial goals like buying a new house, paying
for college education of children, of enjoying a comfortable retirement etc.
Investing even a small amount can produce considerable rewards over the
long-term, especially if you do it regularly. But one needs to decide about
how much he / she wants to invest and where to invest.
Choosing the Right Investment Options
The choice of the best investment options will depend on personal
circumstances as well as general market conditions. For example, a good
investment for a long-term retirement plan may not be a good investment
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
for higher education expenses. In most cases, the right investment is a
balance of three things: Liquidity, Safety and Return.
Liquidity – Accessibility of money
How easily an investment can be converted to cash, since part of invested
money must be available to cover financial emergencies.
Safety - The risk involved
The biggest risk is the risk of losing the money that has been invested.
Another equally important risk is that investments may not provide enough
growth or income to offset the impact of inflation, which could lead to a
gradual increase in the cost of living. There are additional risks as well (like
decline in economic growth). But the biggest risk of all is not investing at all.
Return
Investments are made for the purpose of generating returns. Safe
investments often promise a specific, though limited return. Those that
involve more risk offer the opportunity to make - or lose - a lot of money.
The Investment Process
As investors, we would all like to beat the market handily, and we would all
like to pick "great" investments on instinct. However, while intuition is
undoubtedly a part of the process of investing, it is just part of the process.
As investors, it is not surprising that we focus so much of our energy and
efforts on investment philosophies and strategies, and so little on the
investment process. It is far more interesting to read about how Peter Lynch
picks stocks and what makes Warren Buffett a valuable investor, than it is to
talk about the steps involved in creating a portfolio or in executing trades.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Though it does not get sufficient attention, understanding the investment
process is critical for every investor for several reasons:
1. The investment process outlines the steps in creating a portfolio, and
emphasizes the sequence of actions involved from understanding the
investors
risk
preferences
to
asset
allocation
and
selection
to
performance evaluation. By emphasizing the sequence, it provides for
an orderly way in which an investor can create his or her own portfolio
or a portfolio for someone else.
2. The investment process provides a structure that allows investors to
see the source of different investment strategies and philosophies. By
so doing, it allows investors to take the hundreds of strategies that
they see described in the common press and in investment newsletters
and to trace them to their common roots.
3. The investment process emphasizes the different components that are
needed for an investment strategy to by successful, and by so doing
explain why so many strategies that look good on paper never work
for those who use them.
FIVE STEP INVESTMENT PLAN
Investing is a science, not an art,. We suggest a five-stage investment plan
that may be practiced by investors looking for multiplying their hard-earned
money.





Need Analysis and Profiling
Internalizing and Evaluating the Available Avenues
Mapping and Matching the Profile
Designing an Optimum Portfolio
Continuous Monitoring and Portfolio Management
The first step is performing a Need Analysis check. The requirements and
expectations of the investor should be determined. The needs should be
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
separated from the desires. The facts that should be taken into account are
their age, their profession, the number of dependents, and their income. By
doing this check, the risk profile of the investor should me designed.
The next step would be internalizing the needs. Various investment avenues
should be analyzed. The risk-return profile of investment products is
evaluated in this step. Every investment product varies according to its
return potential and riskiness. Investment products giving a high rate of
return are generally risky and volatile. The products giving a lower rate of
return usually are less risky. Therefore all the available avenues should be
evaluated.
The next step would be mapping the risk-return profile of the investor on to
the investment portfolio. The investment products are matched with the
risk-return profile of the investor. All the investment alternatives that offer
expected rate of return are selected for consideration.
Then an optimum portfolio is designed for the investor. The basket of
investment avenues selected in the previous step are given due weightage
and appropriate amount of money is invested in each of the investment
avenue so as to get maximum return with minimum possible risk.
Finally a continuous watch on the portfolio is extremely important.
Fundamental analysis of the investment products done in the previous
stages would only help in selecting the right product but the right time of
entry or exit from a particular stream is evaluated by doing a technical
analysis. For this professional portfolio management is a must.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Investment Strategies in India
Conventionally, Indian investors were investing in the following avenues:
Fixed Deposits – They cover the fixed deposits of varied tenors offered by
the commercial banks and other non-banking financial institutions. These
are generally a low risk prepositions as the commercial banks are believed to
return the amount due without default. By and large these FDs are the
preferred choice of risk-averse Indian investors who rate safety of capital &
ease of investment above all parameters. Largely, these investments earn a
marginal rate of return of 6-8% per annum.
Government Bonds – The Central and State Governments raise money
from the market through a variety of Small Saving Schemes like national
saving certificates, Kisan Vikas Patra, Post Office Deposits, Provident Funds,
etc. These schemes are risk free as the government does not default in
payments. But the interest rates offered by them are in the range of 7% 9%.
Money-back insurance - Insurance in India is mostly sold and bought as
investment products. They are preferred because of their add-on benefits
like financial life-cover, tax-savings and satisfactory returns. Even if one
does not manage
to save money and invest regularly in financial
instruments, with insurance, the policyholder has no choice. If he does not
pay his premiums on time, his insurance cover will lapse. Money-back
Insurance schemes are used as investment avenues as they offer partial
cash-back at certain intervals. This money can be utilized for children’s
education, marriage, etc.
Endowment Insurance – These policies are term policies. Investors have
to pay the premiums for a particular term, and at maturity the accrued
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
bonus and other benefits are returned to the policyholder if he survives at
maturity.
Bullion Market – Precious metals like gold and silver had been a safe
heaven for Indian investors since ages. Besides jewellery these metals are
used for investment purposes also. Since last 1 year, both Gold and Silver
have highly appreciated in value both in the domestic as well as the
international markets. In addition to its attributes as a store of value, the
case for investing in gold revolves around the role it can play as a portfolio
diversifier.
Stock Market – Indian stock markets particularly the BSE and the NSE, had
been a preferred destination not only for the Indian investors but also for the
Foreign investors. This is evident from the fact that FIs are buying huge
stakes on the Indian bourses. Although Indian Markets had been through
tough times due to various scams, but history shows that they recovered
very fast. Many types of scrip had been value creators for the investors.
People have earned fortunes from the stock markets, but there are people
who
have
lost everything
due
to
incorrect timings
or
selection of
fundamentally weak companies.
Real Estate- Approximately one fourth of all homes sold in 2006 have been
purchased as an investment. Returns are almost guaranteed because
property values are always on the rise due to a growing world population.
Residential real estate is more than just an investment. There are more
ways than ever before to profit from real estate investment.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Mutual Funds - There is a collection of investors in Mutual funds that have
professional fund managers that invest in the stock market collectively on
behalf of investors. Mutual funds offer a better route to investing in equities
for lay investors. A mutual fund acts like a professional fund manager,
investing the money and passing the returns to its investors. All it deducts is
a management fee and its expenses, which are declared in its offer
document.
Unit Linked Insurance Plans - ULIPs are remarkably alike to mutual funds
in terms of their structure and functioning; premium payments made are
converted into units and a net asset value (NAV) is declared for the same. In
traditional insurance products, the sum assured is the corner stone; in ULIPs
premium payments is the key component.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
SAVINGS ACCOUNT
An account primarily opened for and operated by individuals, wherein the
numbers of transactions are few and which give the customer liquidity, with
the facility to earn some interest on the residual balances.
Standard Chartered bank offers 4 types of Savings account matching
different needs of customers namely:
1. Axcess Plus :The Standard Chartered Bank have launched the Axcess Plus
saving account
as a premium product placed in the
market with
maintenance of minimum quarterly balance of 10,000/- The product is
supposed to be targeted to a specific group elite of customers. This will
help to increase the volume and as such the profitability of the company.
2. Super Value
3. Parivaar account
4. Saral Account
ELIGIBILITY (IN GENERAL)

Indian Residents

NRI’s

Clubs, Associations, Trusts and Registered Societies

HUF (Hindu Undivided Family)

Foreign Nationals (QA-22)
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
PRODUCT FEATURES (IN GENERAL)

Account can be in sole name or in joint names

Minimum balance: Minimum Quarterly balance of a specific amount is to
be maintained failing to which a specific fees per quarter has to be paid.

Account can be operated at any branch across the country.
The details are in the table shown in AnnexureI and AnnexureII.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
ULIP-Unit Linked insurance Plan
ULIP is an abbreviation for Unit Linked Insurance Policy. A ULIP is a life
insurance policy which provides a combination of risk cover and investment.
The dynamics of the capital market have a direct bearing on the
performance of the ULIPs.
It provides for life insurance where the policy value at any time varies
according to the value of the underlying assets at the time. ULIP is life
insurance solution that provides for the benefits of protection and flexibility
in investment. The investment is denoted as units and is represented by the
value that it has attained called as Net Asset Value (NAV).
ULIP came into play in the 1960s and is popular in many countries in the
world. The reason that is attributed to the wide spread popularity of ULIP is
because of the transparency and the flexibility which it offers.
As times progressed the plans were also successfully mapped along with life
insurance need to retirement planning. In today’s times, ULIP provides
solutions for insurance planning, financial needs, financial planning for
children’s future and retirement planning. These are provided by the
insurance companies or even banks. Investments made in ULIP has tax
exemption under section 80C of the Indian Income Tax Act, 1961 and also
returns will be covered under section 10(10D).
Most insurers offer a wide range of funds to suit one’s investment objectives,
risk profile and time horizons. Different funds have different risk profiles.
The potential for returns also varies from fund to fund.
The following are some of the common types of funds available along with
an indication of their risk characteristics.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
General
Description
Equity Funds
Nature of Investments
Risk Category
Primarily invested in company
stocks with the general aim of
capital appreciation
Medium to High
Income, Fixed
Interest and
Bond Funds
Invested in corporate bonds,
government securities and other
fixed income instruments
Medium
Cash Funds
Sometimes known as Money Market Low
Funds — invested in cash, bank
deposits
and
money
market
instruments
Balanced
Funds
Combining equity investment with Medium
fixed interest instruments
ULIP provides multiple benefits to the consumer. The benefits include:













Life protection
Investment and Savings
Flexibility
Adjustable Life Cover
Investment Options
Transparency
Options to take additional cover against
Death due to accident
Disability
Critical Illness
Surgeries
Liquidity
Tax planning
Market linked insurance plans invest the premium in to the equity, debt and
cash markets by the way of allocating units, which like any other mutual
fund have a NAV and the customer is free to switch between one fund class
to another depending on the risk factor he wishes to be in. ULIPs offer a
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
better return than the traditional endowment plans and offer a great deal of
flexibility along with great returns making them the finest product offering.
Charges
ULIPs offered by different insurers have varying charge structures. Broadly,
the different types of fees and charges are given below. However it may be
noted that insurers have the right to revise fees and charges over a period of
time.
1. Premium Allocation Charge
This is a percentage of the premium appropriated towards charges before
allocating the units under the policy. This charge normally includes initial
and renewal expenses apart from commission expenses.
2. Mortality Charges
These are charges to provide for the cost of insurance coverage under
the plan. Mortality charges depend on number of factors such as age,
amount of coverage, state of health etc
3. Fund Management Fees
These are fees levied for management of the fund(s) and are deducted
before arriving at the Net Asset Value (NAV).
4. Policy/ Administration Charges
These are the fees for administration of the plan and levied by cancellation
of units. This could be flat throughout the policy term or vary at a predetermined rate.
5. Surrender Charges
A surrender charge may be deducted for premature partial or full
encashment of units wherever applicable, as mentioned in the policy
conditions.
6. Fund Switching Charge
Generally a limited number of fund switches may be allowed each year
without charge, with subsequent switches, subject to a charge.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
7. Service Tax Deductions
Before allotment of the units the applicable service tax is deducted from the
risk portion of the premium.
Investors may note that the portion of the premium after deducting for all
charges and premium for risk cover is utilized for purchasing units.
Important Issues for Investors
Verification Before signing in the proposal
One has to verify the approved sales brochure for
• All the charges deductible under the policy
• Payment on premature surrender
• Features and benefits
• Limitations and exclusions
• Lapsation and its consequences
• Other disclosures
• Illustration projecting benefits payable in two scenarios of 6% and 10%
returns as prescribed by the life insurance council.
Premium Used to Purchase Units
The full amount of premium paid is not allocated to purchase units. Insurers
allot units on the portion of the premium remaining after providing for
various charges, fees and deductions. However the quantum of premium
used to purchase units varies from product to product.
25
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
The total monetary value of the units allocated is invariably less than the
amount of premium paid because the charges are first deducted from the
premium collected and the remaining amount is used for allocating units.
Bajaj Allianz Life Insurance have developed a number of ULIP products
which range from single premium to a regular premium option along with
investment funds ranging from index funds to mid-cap funds and debt
market linked funds.
Refund of premiums if not satisfied with the policy, after
purchasing it
The policyholder can seek refund of premiums if he disagrees with the terms
and conditions of the policy, within 15 days of receipt of the policy document
(Free Look period). The policyholder shall be refunded the fund value
including charges levied through cancellation of units subject to deduction of
expenses towards medical examination, stamp duty and proportionate risk
premium for the period of cover.
To invest additional contribution above the regular premium
One can invest additional contribution over and above the regular premiums
as per their choice subject to the feature being available in the product. This
facility is known as “TOP UP” facility.
Switching the investment fund after taking a ULIP policy
“SWITCH” option provides for shifting the investments in a policy from one
fund to another provided the feature is available in the product. While a
specified number of switches are generally effected free of cost, a fee is
charged for switches made beyond the specified number.
Partial encashment/withdrawal
Products may have the “Partial Withdrawal” option which facilitates
withdrawal of a portion of the investment in the policy. This is done through
cancellation of a part of units.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Discontinuation of payment of premium
a) Discontinuance within three years of commencement – If all the
premiums have not been paid for at least three consecutive years from
inception, the insurance cover shall cease immediately. Insurers may
give an opportunity for revival within the period allowed; if the policy
is not revived within that period, surrender value shall be paid at the
end of third policy anniversary or at the end of the period allowed for
revival, whichever is later.
b) Discontinuance after three years of commencement -- At the end
of the period allowed for revival, the contract shall be terminated by
paying the surrender value. The insurer may offer to continue the
insurance cover, if so opted for by the policy holder, levying
appropriate charges until the fund value is not less than one full year’s
premium. When the fund value reaches an amount equivalent to one
full year’s premium, the contract shall be terminated by paying the
fund value.
ULIP – STANDARD CHARTERED
The flexible Unit linked life insurance plans at Standard Chartered bank provides the
opportunity to participate in market-linked returns while enjoying the valuable benefits of
life insurance. Insurance Plans for Standard Chartered Bank customers is issued by Bajaj
Allianz Life Insurance Company Limited.
Bajaj Allianz
Bajaj Allianz Life Insurance Company Limited is a Union between Allianz SE,
one of the world’s largest Life Insurance companies and Bajaj Auto, one of
the biggest 2- &- 3 wheeler manufacturers in the world.
Allianz SE is a leading insurance conglomerate globally and one of the
largest asset managers in the world, managing assets worth over a Trillion
Euros (Over R. 55, 00,000 crores). Allianz SE has over 115 years of financial
experience in over 70 countries.
Bajaj Auto is one of the most trusted name is Indian auto for over 55 years.
At Bajaj Allianz customer delight is our guiding principle. Ensuring world27
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
class solutions by offering customized products with transparent benefits,
supported by best technology is our business philosophy.
Market linked insurance plans invest the premium in to the equity, debt and
cash markets by the way of allocating units, which like any other mutual
fund have a NAV and the customer is free to switch between one fund class
to another depending on the risk factor he wishes to be in. ULIPs offer a
better return than the traditional endowment plans and offer a great deal of
flexibility along with great returns making them the finest product offering.
We at Bajaj Allianz Life Insurance have developed a number of ULIP
products which range from single premium to a regular premium option
along with investment funds ranging from index funds to mid-cap funds and
debt market linked funds.
CAPITAL UNIT GAIN – A UNIT LINKED PLAN:
Capital UnitGain is a unit linked endowment regular premium plan with the benefit of
life protection offered by Bajaj Allianze. By choosing an appropriate premium level and
term, individual can match the maturity date of the plan to a specific savings need such as
child’s education, wedding, retirement etc. It has unmatched flexibility to meet any
emergency or any financial need.
Bajaj Allianz Capital UnitGain gives up to 97% allocation from the first year onwards to
ensure that your investment income gets accelerated from the first year itself. With Bajaj
Allianz Capital UnitGain one can get to choose from a wide range of high quality
investment funds coupled with flexible investment management. This is the one-stop
solution to investment, tax-saving and protection needs.
The Key Features of the Capital Unit Gain Plan are:
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
• Option of choosing any sum assured between minimum and maximum limits to match
insurance needs.
• Option of choosing from a host of additional rider benefits: UL Accidental Death
Benefit, UL Accidental Permanent Total/Partial Disability Benefit, UL Critical Illness
Benefit and UL Hospital Cash Benefit
• Increase savings by paying top up premiums.
• Same premium allocation for all policy years with higher allocation for top up
premiums.
• Individuals choice of adopting own investment strategy to grow the funds under the
policy.
• Choice of 5 investment funds with flexible investment management, with the option of
changing funds at any time and also invest in the newer funds that would be introduced
from time to time.
• Partial withdrawals without any surrender charges.
• Flexibility to increase / decrease the regular premiums
Regular Premium
Market linked insurance plans invest the premium in to the equity, debt and
cash markets by the way of allocating units, which like any other mutual
fund have a NAV and the customer is free to switch between one fund class
to another depending of the risk factor he wishes to be in. ULIPs offer better
returns than the traditional endowment plans and offer a great deal of
flexibility along with great returns making them the finest product offering.
We at Bajaj Allianz Life Insurance have developed a number of ULIP
products which range from single premium to a regular premiums option
along with investment funds ranging from index funds to mid-cap funds and
debt market linked funds.
New Unit Gain Supper
Ensure fully and get MAX allocation along with a host of additional benefits
to choose from.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
A flexible unit linked plan that allows partial & full withdrawal after 3 years.
Additional benefits:
Accidental Death Benefit and UL Disability Benefit.
Critical Illness Benefit and UL Hospital Cash Benefit.
funds to choose from & flexibility to pay top-up any time.
Unit Gain plus Gold
A Unique plan with the combination of protection and prospects of earning
attractive returns with investments in various mixes of securities that makes a
perfect plan to last you a lifetime of prosperity and happiness.
Additional Benefit Riders:
Accidental Death Benefit.
Critical Illness benefit.
Hospital Cash Benefit.
Family Income Benefit.
Waiver of Premium benefit.
New FamilyGain
A Flexible Investment plan with Pure Stock Fund- (a unique ethical fund that
invests in environment responsive companies and also suits religious
guidelines.)
Life Cover: Sum Assured + Value of Units.
and full withdrawals after 3 years.
Accidental Death Benefit and UL Accidental Permanent Total/Partial
Disability Benefit.
Critical Illness Benefit and UL Hospital Cash Benefit.
UL Family Income benefit and UL Waiver of Premium Benefit.
New Unit Gain Plus
Flexible investment plans with an option of withdrawing money whenever
needed.
Guaranteed life cover.
d every year.
Partial and full withdrawls after 3 years.
flexibility to meet your changing lifestyle and insurance
requirements.
Century Plus
A limited premium payment term option with a unique combination of
protection and attractive returns.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
% allocation in year 1 and year 2 and 100% allocation 3rd year onwards.
life cover with twin-benefits of sum assured plus fund value.
Loyalty Units of 7% annualised premium from sixth year onwards.
lty Units on regular premium fund value for annual
premium equal to or above Rs. 1 Lac
New Unit Gain
An investment plan that creates value for every rupee you invest.
Young Care
Bajaj Allianz Young Care offers you a unique way to reassure yourself that you
have taken care of the ones you cherish. This investment plan is a Gift of a
lifetime to your loved one, as it offers a guaranteed Sum Assured and
continued pay premium on your behalf, in case of your unfortunate death.
Young Care Plus
This investment plan is a Gift of a lifetime to your loved one, as it offers a
guaranteed Sum Assured, continued pay premium on your behalf, in case of
your unfortunate death and critical illness benefit.
Single Premium
Unit Linked Single Premium Plans require the premium to be paid only once.
New Unit Gain Premier SP
New Unit Gain Premier SP is an unique insurance cum investment plan that
provides your investment a zing from the start, by allocating 105% of the
single premium paid from day one, thereby ensuring that you get MORE.
% allocation.
life cover.
New Unit Gain Plus SP
The Only Single premium plan that gives you Maxx Allocation
% Allocation.
Life Cover.
of 4 Investment funds.
3 free switches allowed ever year.
and Full withdrawals after 3 years.
minimum premium as low as Rs10,000 only.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
MUTUAL FUNDS
A Mutual Fund is a trust that pools the savings of a number of investors who
share a common financial goal. The money thus collected is then invested in
capital market instruments such as shares, debentures and other securities.
The income earned through these investments and the capital appreciation
realised are shared by its unit holders in proportion to the number of units
owned by them. Thus a Mutual Fund is the most suitable investment for the
common man as it offers an opportunity to invest in a diversified,
professionally managed basket of securities at a relatively low cost. The flow
chart below describes broadly the working of a mutual fund:
Mutual Fund Operation Flow Chart
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
ORGANISATION OF A MUTUAL FUND
There are many entities involved and the diagram below illustrates the
organisational set up of a mutual fund
Mutual funds
Mutual fund is vehicle that facilitates a number of investors to pool their
money and have it jointly managed by a professional money manager
Sponsor
Sponsor is the person who acting alone or in combination with another body
corporate establishes a mutual fund. The Sponsor is not responsible or liable
for any loss or shortfall resulting from the operation of the Schemes beyond
the initial contribution made by it towards setting up of the Mutual Fund.
Trustee
Trustee is usually a company (corporate body) or a Board of Trustees (body
of individuals). The main responsibility of the Trustee is to safeguard the
interest of the unit holders and ensure that the AMC functions in the interest
of investors and in accordance with the Securities and Exchange Board of
India (Mutual Funds) Regulations, 1996.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Asset Management Company (AMC)
The AMC is appointed by the Trustee as the Investment Manager of the
Mutual Fund. At least 50% of the directors of the AMC are independent
directors who are not associated with the Sponsor in any manner. The AMC
must have a net worth of at least 10 crores at all times.
Transfer Agent
The AMC if so authorized by the Trust Deed appoints the Registrar and
Transfer Agent to the Mutual Fund. The Registrar processes the application
form, redemption requests and dispatches account statements to the unit
holders. The Registrar and Transfer agent also handles communications with
investors and updates investor records.
Regulatory Authorities
To protect the interest of the investors, SEBI formulates policies and
regulates the mutual funds. It notified regulations in 1993 (fully revised in
1996) and issues guidelines from time to time. MF either promoted by public
or by private sector entities including one promoted by foreign entities is
governed by these Regulations.
SEBI approved Asset Management Company (AMC) manages the funds by
making investments in various types of securities. Custodian, registered with
SEBI, holds the securities of various schemes of the fund in its custody.
According to SEBI Regulations, two thirds of the directors of Trustee
Company or board of trustees must be independent.
The Association of Mutual Funds in India (AMFI) reassures the investors in
units of mutual funds that the mutual funds function within the strict
regulatory framework. Its objective is to increase public awareness of the
mutual fund industry.
AMFI also is engaged in upgrading professional standards and in promoting
best industry practices in diverse areas such as valuation, disclosure,
transparency etc.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
MUTUAL FUNDS
The flow chart below describes broadly the working of a mutual fund:
CONCEPT OF MUTUAL FUNDS
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
TYPES OF MUTUAL FUND SCHEMES
Wide varieties of Mutual Fund Schemes exist to cater to the needs such as
financial position, risk tolerance and return expectations etc. The table below
gives an overview into the existing types of schemes in the Industry.
BY STRUCTURE
1. Open - Ended Schemes:
An open-end fund is one that is available for subscription all through the
year. These do not have a fixed maturity. Investors can conveniently buy
and sell units at Net Asset Value ("NAV") related prices. The key feature of
open-end schemes is liquidity.
2. Close - Ended Schemes:
A closed-end fund has a stipulated maturity period which generally ranging
from 3 to 15 years. The fund is open for subscription only during a specified
period. 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
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
stock exchanges where they are listed. In order to provide an exit route to
the investors, some close-ended funds give an option of selling back the
units to the Mutual Fund through periodic repurchase at NAV related prices.
SEBI Regulations stipulate that at least one of the two exit routes is provided
to the investor.
3. Interval Schemes:
Interval Schemes are that scheme, which combines the features of openended and close-ended schemes. The units may be traded on the stock
exchange or may be open for sale or redemption during pre-determined
intervals at NAV related prices.
By investment objective:
Growth Schemes: Growth Schemes are also known as equity schemes. The
aim of these schemes is to provide capital appreciation over medium to long
term. These schemes normally invest a major part of their fund in equities
and are willing to bear short-term decline in value for possible future
appreciation.
Income Schemes: Income Schemes are also known as debt schemes.
The aim of these schemes is to provide regular and steady income to
investors. These schemes generally invest in fixed income securities such as
bonds and corporate debentures. Capital appreciation in such schemes may
be limited.
Balanced Schemes: Balanced Schemes aim to provide both growth and
income by periodically distributing a part of the income and capital gains
they earn. These schemes invest in both shares and fixed income securities,
in the proportion indicated in their offer documents (normally 50:50).
Money Market Schemes: Money Market Schemes aim to provide easy
liquidity, preservation of capital and moderate income. These schemes
generally invest in safer, short-term instruments, such as treasury bills,
certificates of deposit, commercial paper and inter-bank call money.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
The risk return trade-off indicates that if investor is willing to take higher
risk then correspondingly he can expect higher returns and vise versa if he
pertains to lower risk instruments, which would be satisfied by lower
returns. For example, if an investors opt for bank FD, which provide
moderate return with minimal risk. But as he moves ahead to invest in
capital protected funds and the profit-bonds that give out more return which
is slightly higher as compared to the bank deposits but the risk involved also
increases in the same proportion.
Thus investors choose mutual funds as their primary means of investing, as
Mutual funds provide professional management, diversification, convenience
and liquidity. That doesn’t mean mutual fund investments risk free. This is
because the money that is pooled in are not invested only in debts funds
which are less riskier but are also invested in the stock markets which
involves a higher risk but can expect higher returns. Hedge fund involves a
very high risk since it is mostly traded in the derivatives market which is
considered very volatile.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
BY NATURE
1. Equity fund:
These funds invest a maximum part of their corpus into equities holdings.
The structure of the fund may vary different for different schemes and the
fund manager’s outlook on different stocks. The Equity Funds are subclassified depending upon their investment objective, as follows:




Diversified Equity Funds.
Mid-Cap Funds.
Sector Specific Funds.
Tax Savings Funds (ELSS).
Equity investments are meant for a longer time horizon, thus Equity
funds rank high on the risk-return matrix.
2. Debt funds:
The objective of these Funds is to invest in debt papers. Government
authorities, private companies, banks and financial institutions are some of
the major issuers of debt papers. By investing in debt instruments, these
funds ensure low risk and provide stable income to the investors. Debt funds
are further classified as:
Gilt Funds: Invest their corpus in securities issued by Government,
popularly known as Government of India debt papers. These Funds carry
zero Default risk but are associated with Interest Rate risk. These schemes
are safer as they invest in papers backed by Government.
Income Funds: Invest a major portion into various debt instruments such
as bonds, corporate debentures and Government securities.
MIPs: Invests maximum of their total corpus in debt instruments while they
take minimum exposure in equities. It gets benefit of both equity and debt
market. These scheme ranks slightly high on the risk-return matrix when
compared with other debt schemes.
Short Term Plans (STPs): Meant for investment horizon for three to six
months. These funds primarily invest in short term papers like Certificate of
Deposits (CDs) and Commercial Papers (CPs). Some portion of the corpus is
also invested in corporate debentures.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Liquid Funds: Also known as Money Market Schemes, These funds provides
easy liquidity and preservation of capital. These schemes invest in shortterm instruments like Treasury Bills, inter-bank call money market, CPs and
CDs. These funds are meant for short-term cash management of corporate
houses and are meant for an investment horizon of 1day to 3 months. These
schemes rank low on risk-return matrix and are considered to be the safest
amongst all categories of mutual funds.
3.Balanced funds:
As the name suggest they, are a mix of both equity and debt funds. They
invest in both equities and fixed income securities, which are in line with
pre-defined investment objective of the scheme. These schemes aim to
provide investors with the best of both the worlds. Equity part provides
growth and the debt part provides stability in returns.
Further the mutual funds can be broadly classified on the basis of
investment parameter viz,
Each category of funds is backed by an investment philosophy, which is predefined in the objectives of the fund. The investor can align his own
investment needs with the funds objective and invest accordingly.
Types of returns
There are three ways, where the total returns provided by mutual funds can
be enjoyed by investors.
Income is earned from dividends on stocks and interest on bonds. A fund
pays out nearly all income it receives over the year to fund owners in the
form of a distribution.
If the fund sells securities that have increased in price, the fund has a capital
gain. Most funds also pass on these gains to investors in a distribution.
If fund holdings increase in price but are not sold by the fund manager, the
fund's shares increase in price. You can then sell your mutual fund shares for
a profit. Funds will also usually give you a choice either to receive a check
for distributions or to reinvest the earnings and get more shares.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Advantages of Investing Mutual Funds:
1. 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.
2. 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.
3. 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.
4. 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.
Disadvantages of Investing Mutual Funds:
1. Professional Management- Some funds doesn’t perform in neither the
market, as their management is not dynamic enough to explore the
available opportunity in the market, thus many investors debate over
whether or not the so-called professionals are any better than mutual fund
or investor him self, for picking up stocks.
2. Costs – The biggest source of AMC income, is generally from the entry &
exit load which they charge from an investors, at the time of purchase. The
mutual fund industries are thus charging extra cost under layers of jargon.
3. Dilution - Because funds have small holdings across different companies,
high returns from a few investments often don't make much difference on
the overall return. Dilution is also the result of a successful fund getting too
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
big. When money pours into funds that have had strong success, the
manager often has trouble finding a good investment for all the new money.
4. Taxes - when making decisions about your money, fund managers don't
consider your personal tax situation. For example, when a fund manager
sells a security, a capital-gain tax is triggered, which affects how profitable
the individual is from the sale. It might have been more advantageous for
the individual to defer the capital gains liability.
THE MUTUAL FUNDS 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
the. the history of mutual funds in india can be broadly divided into four
distinct phases
First phase – 1964-87
Unit trust of India (uti) was established on 1963 by an act of parliament. it
was set up by the reserve bank of india and functioned under the regulatory
and administrative control of the reserve bank of india. in 1978 uti was delinked from the rbi and the industrial development bank of india (idbi) took
over the regulatory and administrative control in place of rbi. the first
scheme launched by uti was unit scheme 1964. at the end of 1988 uti had
rs.6,700 crores of assets under management.
Second phase – 1987-1993 (entry of public sector funds)
1987 marked the entry of non- uti, public sector mutual funds set up by
public sector banks and life insurance corporation of india (lic) and general
insurance corporation of india (gic). sbi mutual fund was the first non- uti
mutual fund established in june 1987 followed by 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). Lic
established its mutual fund in June 1989 while gic had set up its mutual fund
in December 1990.
At the end of 1993, the mutual fund industry had assets under management
of rs.47, 004 crores.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Third phase – 1993-2003 (entry of private sector funds)
With the entry of private sector funds in 1993, a new era started in the
Indian mutual fund industry, giving the Indian investors a wider choice of
fund families. also, 1993 was the year in which the first mutual fund
regulations came into being, under which all mutual funds, except uti were
to be registered and governed. the erstwhile kothari pioneer (now merged
with franklin templeton) was the first private sector mutual fund registered
in july 1993.
The 1993 sebi (mutual fund) regulations were substituted by a more
comprehensive and revised mutual fund regulations in 1996. the industry
now functions under the sebi (mutual fund) regulations 1996.
The number of mutual fund houses went on increasing, with many foreign
mutual funds setting up funds in India and also the industry has witnessed
several mergers and acquisitions. As at the end of January 2003, there were
33 mutual funds with total assets of rs. 121,805crores. The unit trust of
india with rs.44, 541 crores of assets under management was way ahead of
other mutual funds.
Fourth phase – since February 2003
In February 2003, following the repeal of the unit trust of india act 1963 uti
was bifurcated into two separate entities. one is the specified undertaking of
the unit trust of india with assets under management of rs.29,835 crores as
at the end of january 2003, representing broadly, the assets of us 64
scheme, assured return and certain other schemes. the specified
undertaking of unit trust of india, functioning under an administrator and
under the rules framed by government of india and does not come under the
purview of the mutual fund regulations.
The second is the uti mutual fund ltd, sponsored by sbi, pnb, bob and lic. it
is registered with sebi and functions under the mutual fund regulations. with
the bifurcation of the erstwhile uti which had in march 2000 more than
rs.76,000 crores of assets under management and with the setting up of a
uti mutual fund, conforming to the sebi mutual fund regulations, and with
recent mergers taking place among different private sector funds, the
mutual fund industry has entered its current phase of consolidation and
growth. as at the end of september, 2004, there were 29 funds, which
manage assets of rs.153108 crores under 421 schemes.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
The graph indicates the growth of assets over the years
RESEARCH ON MUTUAL FUNDS
Mutual Funds over the years have gained immensely in their popularity.
Apart from the many advantages that investing in mutual funds provide like
diversification, professional management, the ease of investment process
has proved to be a major enabling factor. However, with the introduction of
innovative products, the world of mutual funds nowadays has a lot to offer
to its investors. With the introduction of diverse options, investors needs to
choose a mutual fund that meets his risk acceptance and his risk capacity
levels and has similar investment objectives as the investor.
With the plethora of schemes available in the Indian markets, an investors
needs to evaluate and consider various factors before making an investment
decision. Since not everyone has the time or inclination to invest and do the
analysis himself, the job is best left to a professional. Since Indian economy
is no more a closed market, and has started integrating with the world
markets, external factors which are complex in nature affect us too. Factors
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
such as an increase in short-term US interest rates, the hike in crude prices,
or any major happening in Asian market have a deep impact on the Indian
stock market. Although it is not possible for an individual investor to
understand Indian companies and investing in such an environment, the
process can become fairly time consuming. Mutual funds (whose fund
managers are paid to understand these issues and whose Asset Management
Company invests in research) provide an option of investing without getting
lost in the complexities.
Most importantly, mutual funds provide risk diversification: diversification of
a portfolio is amongst the primary tenets of portfolio structuring, and a
necessary one to reduce the level of risk assumed by the portfolio holder.
Most of the investors are not necessarily well qualified to apply the theories
of portfolio structuring to their holdings and hence would be better off
leaving that to a professional. Mutual funds represent one such option.
Lastly, Evaluate past performance, look for stability and although past
performance is no guarantee of future performance, it is a useful way to
assess how well or badly a fund has performed in comparison to its stated
objectives and peer group. A good way to do this would be to identify the
few best performing funds (within your selected investment objectives) over
various periods, say 3 months, 6 months, one year, two years and three
years. Shortlist funds that appear in the top 5 in each of these time horizons
as they would have thus demonstrated their ability to be not only good but
also, consistent performers.
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MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
46
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
The Investors for Mutual Fund
Mutual Funds are becoming a very popular form of investment characterised
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 to opt for mutual funds.
Mutual Funds are suitable for the investors who call for:

Expertise Supervision: Making investments is not a full time
assignment of investors. So many investors hardly have a professional
attitude towards their investment. This investment is suitable for those
invetsors. 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 scrips are to be bought,
what investments are to be sold and more appropriate decisions.
 Regular Income or Ease of Liquidity- A distinct advantage of
a mutual fund over other investments is that there is always a market
for its unit/ shares. Moreover, 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.
47
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES

Risk reluctancy- Mutual funds are relatively safer and stable, the
reason being it provides Diversification which is the idea of putting
not putting all the eggs into one basket. By investing in many
companies the mutual funds can protect themselves from unexpected
drop in values of some shares. 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.

Safety of Investments-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
investors 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 cost visibly increases 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
48
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Taxation in India
India has a well developed tax structure with a three-tier federal structure,
comprising the Union Government, the State Governments and the
Urban/Rural Local Bodies. The main taxes/duties that the Union Government
is empowered to levy are Income Tax (except tax on agricultural income,
which the State Governments can levy), Customs duties, Central Excise and
Sales Tax and Service Tax. The principal taxes levied by the State
Governments are Sales Tax (tax on intra-State sale of goods), Stamp Duty
(duty on transfer of property), State Excise (duty on manufacture of
alcohol), Land Revenue (levy on land used for agricultural/non-agricultural
purposes), Duty on Entertainment and Tax on Professions & Callings. The
Local Bodies are empowered to levy tax on properties (buildings, etc.),
Octroi (tax on entry of goods for use/consumption within areas of the Local
Bodies), Tax on Markets and Tax/User Charges for utilities like water supply,
drainage, etc. .
Some of the changes are:



Reduction in customs and excise duties
Lowering corporate Tax
Widening of the tax base and toning up the tax administration.
Direct Taxes
Personal Income Tax
Individual income slabs are 0%, 10%, 20%, 30% for annual incomes upto
Rs 50,000, 50,000 – 60,000, 60,000 - 1,50,000 and above 1,50,000
respectively.
Corporate Income Tax
For domestic companies, this is levied @ 35% plus surcharge of 5%, where
as for a foreign company (including branch/project offices), it is @ 40% plus
surcharge of 5%. An Indian registered company, which is a subsidiary of a
foreign company, is also considered an Indian company for this purpose.
49
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Depreciation and interest deductions:
Depreciation rates
Assets
Buildings
Plant and Machinery
Rates (%)
5-100
25-100
Furniture and Fittings
15
Vehicles (Other than for commercial
use)
20
Pollution Control Equipment
80
Energy Saving Devices
80
Ships
25
Intangible assets
25
Withholding Tax for NRIs and Foreign Companies:
Withholding Tax Rates for payments made to Non-Residents are determined
by the Finance Act passed by the Parliament for various years. The current
rates are:
1.
2.
3.
4.
5.
Interest - 20% of Gross Amount
Dividends - 10%
Royalties - 20%.
Technical Services - 20%.
Any other Services - Individuals - 30% of net income
Companies/Corporates - 40% of net income
The above rates are general and in respect of the countries with which India
does not have a Double Taxation Avoidance Agreement (DTAA).
50
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Double Taxation Relief:
India has entered into DTAA with 65 countries including countries like
U.S.A., U.K., Japan, France, Germany, etc. These agreements provides for
relief from the double taxation in respect of incomes by providing exemption
and also by providing credits for taxes paid in one of the countries. These
treaties are based on the general principles laid down in the model draft of
the Organisation for Economic Cooperation and Development (OECD) with
suitable modifications as agreed to by the other contracting countries. In
case of countries with which India has double taxation avoidance
agreements, the tax rates are determined by such agreements and are
indicated for various countries as under:
General Tax Incentives for Industries:

100% deduction of profits and gains for ten years is available in
respect of the following:
o
o
o
o
o
o
Any enterprise carrying on the business of
developing, maintaining and operating infrastructure
facilities viz., roads, highways, bridges, airports,
ports, rail systems, industrial towns, inland
waterways, water supply projects, water treatment
systems, irrigation projects, sanitation and sewage
projects, solid waste management systems.
Undertakings engaged in generation or generation
and distribution, transmission or distribution of
power, which commence these activities before
31.3.2006.
Any company engaged in scientific and industrial
research and development activities, approved by
the prescribed authority, before 31.3.2003.
Any undertaking which develops, operates, maintains
an Industrial Park or Special Economic Zone before
31.3.2006.
Notified Industrial Undertakings set up in the North
Eastern region including seven north-eastern states
and the state of Sikkim.
Undertakings developing and building housing
projects approved by the local authority before
51
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
31.3.2001and which are completed before
31.3.2003.


100% deduction for seven years for undertakings producing or
refining mineral oil.
100% deduction from income for first five years and 30% (for
persons other than companies: 25%) in subsequent five years is
available in respect of the following:
o
o
o
o






Company which starts providing telecommunication
services whether basic or cellular including radio
paging, domestic satellite service, network or
trunking, broad band network and internet services
before 31.3.2003.
Industrial undertakings located in certain specified
industrially backward states and districts.
Undertakings which begin to operate cold chain
facilities for agricultural produce before 31.3.2003.
Undertakings engaged in the business of handling,
storage, transportation of food grains.
50% deduction for a period of five years is available to
undertakings engaged in the business of building, owning and
operating multiplex theatres or convention centres constructed
before 31.3.2005.
Tax exemption of 100% on export profits for ten years upto F.Y.
2009-10, for new industries located in EHTPs and STPs and
100% Export Oriented Units. For units set up in Special
Economic Zones (SEZs), 100% deduction of export income for
first five years followed by 50% for next two years, even beyond
2009-10.
Tax exemption of 100% of Export profits for ten years for new
industries located in Integrated Infrastructure Development
Centres or Industrial Growth Centres of the North Eastern
Region.
Deduction of 50% of export profits from the gross total income.
The deduction would be restricted to 30% for financial year
2003-04 and no deduction is allowable subsequently.
Deduction from the gross total income of 50% of foreign
exchange earnings by hotels and tour operators. The deduction
would be restricted to 30% for financial year 2003-04 and no
deduction is allowable subsequently.
50% deduction of export income due to export of computer
software or film software, television software, music software,
52
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES


from the gross total income. The deduction would be restricted
to 30% for financial year 2003-04 and no deduction is allowable
subsequently.
Deduction in respect of certain inter-corporate dividends to the
extent of dividend declared.
Exemption of any income by way of dividend, interest or long
term capital gains of an infrastructure capital fund or an
infrastructure capital company from investment made by way of
shares or long term finance in any enterprises carrying on the
business of developing, maintaining and operating infrastructure
facility.
Sales Tax
Central Sales Tax (CST)
CST is 4% on manufactured goods.
Local Sales Tax (LST)
Where a sale takes place within a state, LST would be levied. Such a tax
would be governed by the relevant state tax legislation. This is normally up
to 15%.
Excise Duty
Excise duty on most commodities ranges between 0 to 16%. Only on seven
items duty is imposed at 32%, viz., motor cars, tyres, aerated soft drinks,
air conditioners, polyesters filament yarn, pan masala and chewing tobacco.
Duty is charged at 30% on petrol with additional excise duty at Rs. 7 per
litre. The said rates are subject to exemptions and deductions thereon as
may be notified from time to time. Central VAT (CENVAT) is applicable to
practically all manufactured goods, so as to avoid cascading effect on duty.
Small Scale Sector is exempted from payment of excise duty from annual
production upto Rs.10 million.
Customs Duty
The rates of basic duties vary from 0 to 30%.
Salient features are:
53
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
o
o
o
o
o
o
o
Peak customs duty reduced from 220% (in 1991) to 30% (in
2002).
The general project import duty (for new projects and
substantial expansion of existing projects) reduced from 85% to
25%.
Import duty under EPCG Scheme is 5%.
R&D imports - 5% customs duty.
Export made with imported inputs get concessions in form of
duty drawback, duty entitlement pass book scheme and advance
licence.
Many type of industries such as 100% EOU and units in free
trade zone get facility of zero import duty.
An Authority for Advance Ruling for foreign investor.
54
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Past Trend of Stocks
HCC
The stock is working consistently with no high and low spins. Thus is low
risky stock. But the retunrs from the stock has not augmented in the period.
Gammon India
The stock is risky one because of high variation in the value. But the overall
performance of the stock has improved.
55
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Punj Lloyd
The stock is performing average as compared to the other schemes. But the
returns have increased overall.
Patel Eng.
The stock has declined in the value over the time. But since the variation is
less, the stock is for risk averted investors.
56
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
JP Associates
The stock is giving fewer returns as compared to the other ones and even
the variation in the value is verry high thus is a risky stock to invest into.
DLF
The stock is giving verry good returns as compared to the others but the
variation in the returns is verry high.
57
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Tata Power
The stock is performing superiorly and is consantly increasing giving the
highest returns.
SAIL
The stock is consistent over the time period without fewer returns. And is
very less risky because of less swing in the returns.
58
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Unitech
The stock is not working well in the market the returns being reducing over
the time and is giving high deviations.
Tata Steel
The stock is performig good with returns increasing and the returns are
lessrisky because of less variations in the value.
59
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
RESEARCH METHODOLOGY
MEANING
Research inculcates scientific and inductive thinking and it promotes the development of
logical habits of thinking and organization. The role of research in several fields of
applied economies, whether related to business or to the economy as a whole, has greatly
increased in modern times. Research in common parlance refers to a search for
knowledge. It can also be defined as a scientific and systematic search for pertinent
information on a specific topic.
Research Methodology is a way to systematically solve a research problem. It may
understood as a science of studying how research is done scientifically. In it we study the
various steps that are generally adopted by a researcher in studying his research problem
along with the logic behind them. It is necessary for the researcher to know not only need
to know how to develop certain indices or tests, how to calculate, how to apply particular
research techniques, but they also need to know which of these methods, are relevant and
which are not, and would they indicate and why.
The research frame for the study is detailed below. It is necessary to explain the
methodology for the research work done. The purpose of research is to discover answers
to questions through some specific procedure. The aim of research is to find out the truth
which is hidden or which has not been discovered yet. While conducting this research we
have mainly used primary data and some sources of secondary data also.
The research process, which followed by me, consisted following steps:1.
Defining the problem & Research Objectives:
This is the first
stage in the research process i.e. the definition of the problem “MUTUAL FUNDS AND
OTHER
INVESTMENT
TOOLS
COMPARITIVE
ANALYSIS
AND
INVESTMENT STRATEGIES”.
60
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Developing the Research plan:
2.
The development plan has the
following steps: (i)
Data sources:
Two types of data were taken into consideration
i.e. secondary data & primary data. My major emphasis was on
gathering the primary data. The secondary data has been used to
make things more clear.
a)
the
Primary data:
information,
Direct collection of data from the source of
technology
includes
personal
interviewing,
surveys etc.
b)
Secondary data: Indirect collection of data from sources
containing
broachers,
past
or
Annual
recent
past
information
publications,
books,
like
insurance
newspapers
and
magazines.
(ii).
Research approach:
Research.
Surveys
Surveys are best suited for Descriptive
are
undertaken
to
learn
about
people
acknowledge, beliefs, preferences, satisfaction and so on and to
measure these magnitudes in the general public. Therefore I have
done this survey for the Descriptive Research process.
(iii)
Research Instrument: A close friend questionnaire was constructed for my
survey. A questionnaire consisting a set of questions was presented to respondents for
their answers.
(iv)
Research Instrument: The sampling plan calls for three decisions: (a) Sampling Unit: Who is to be surveyed?
The target population must be defined that has to be sampled. It is
necessary so as to develop a sampling frame so that everyone in the
target population has an equal chance of being sampled. I have
completed my survey in jalandhar.
61
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
(b) Sample Size: How many people have to be surveyed?
The sample consisted of 50 respondents. The sample was drawn from
people having different educational qualifications, occupations and age
groups. The selection of the respondents was done on the basis of
simple random sampling.
(c) Contents Method: Once the sampling plan has been determined; the
question is how the subject should be contacted i.e. by the telephone,
mail or personal interview. Here in this survey. I have contacted the
respondents through the personal interviews.
2.
Collecting the information:
After this I have collected
information from the respondents with the help of questionnaires.
3.
the
Analyze the information:
The next step is to extract the related
findings from the collected data. I have tabulated the collected data and
developed frequency distributions.
62
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
ANALYSIS & INTERPRETATIONS
Risk tolerance, Investors point of view is the most important factor to
consider before investing in any of the investmnet pool. Thus to stumble on
the Risk, investment duration, time horizon, job, age and income
relation, a survey was conducted asking questions targeting our point that
was to analyze the investors investing strategies, risk avertness etc.
Primary data which was congregated by a Survey with a survey sample of
50.
63
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Risk versus Income
Fig
Analysis
100% of the investors of Income group 1-2 Lakh invest in low Risk
Schemes, i.e they invest their money for longer time. 40% invest in Low and
60% invest in Medium Risk level Schemes in income group of 2-3 Lakh.
Under income group of 3-5 Lakh 22% invest in High risk oriented schemes,
33% in Low Risk oriented schemes and 44% in Medium Risk oriented
schemes. In High income group of 5-8 Lakh 33% of the investors invest in
High Risk oriented schemes, 44% in Medium Risk oriented scheme and 22%
in low risk oriented schemes. The highest income level group in the survey
does not invest in low Risk schemes while maximum of them invest in
Medium Risk level (66%) and rest 44% invest in High risk level schemes.
64
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Income Vs Investment
Fig
Analysis
Investors with high income Level can invest more sums per month than as
compared to the lower Income level investors. 100% of the investors in
income group of 1-2 Lakh can invest 1-5 thousand, 50% Investors in income
group of 2-3 Lakh can invest 1-5 thousand and 50% can invest 5-10
thousand. 11.1% of Investors in income group of 3-5 Lakh can invest 1-5
thousand and rest invests 5-10 thousand monthly. Higher income group
invests more per month
65
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Risk Vs Job
Fig
Fig.
Analysis
Through the survey it was established that Self employed are less Risk
oriented and thus prefer least riskier Investments, thus can go for Long term
Investments. 60% of self employed investors prefer Low risk investments
and rest 20% each in low and high risk oriented schemes. The Private
Service category ones are Medium risk oriented. 30% are risk averted,55%
are medium risk bearing category and 15% are high risk bearing ones. Even
the governmnet employed investors are low risk oriented ones. 50% of them
invest in low risk schemes, 25% eacg in high and medium risky schemes.
66
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Risk Vs Age
Fig
Analysis
Under Age group of 20-25 18.18% invests in low risk schemes, 63.63% in
Medium risk while 18.18% in high risk oriented schemes. Under age group
of 26-30, 16.66% prefer low risk, 50% prefer medium and 33.33% prefer
high risk. While 66% of highest group age invest in Low Risk Level schemes
and rest invests in medium one. Thus we see that if age alone is considered
to judge the risk factors, the risk bearing potential decreases with increase
in age.
Thus according to his/her risk avertness the investors can look upon the
appropriate schemes for them and can invest into accordingly.
67
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Income Vs purpose of Investments
Analysis
Maximum number of the investors are opting the Life insurance investments
and for the Tax Saving Investments. Specifically low income group are
heading for these two options only, but the higher income group investors
still going for child care and health insurance.
68
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Age Vs Investment
Younger age investors are showing more variation in the data about 65% of
them is showing 5-10000 investment per month. Medium age group
investors are more interested in low investment per month. While higher age
group again showing variations with maximum in 5- 10000 and above 20000
investment per month.
69
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Age Vs Horizon of Time
The young investors for apparent reasons are investing in for higher duration
while the investors under high age group are investing in relatively less
durations. The investors in medium age are more interested in gaining quick
returns for one reason could be their ongoing expenditure requirements.
70
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Age Vs Purpose of Investments
62% of the young investors are opting the tax saving investments while45%
are opting for Life insurance and age group of 40-50 are majorly opting for
tax saving while the investors in highest age group of our survey preffered
mostly Life insurance investments for them.
71
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Purpose of Investment Vs Horizon of Time
Investments for the purpose of Tax Savings are distributed over almost all
horizon of time like 11-15 years, 6-10years, 1-2 years etc. according to the
requiremnets of the investors. While the Life Insurance purpose investments
grab attention for 21-35 years and 11-15 years.
72
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Conclusion
The investors while investing
Selecting a tool may seem like a daunting task, but knowing your objectives and risk
tolerance is half the battle. Thus the investors should study the tools before investing in
and should match the scheme with their preferences.
Before acquiring shares in any fund, an investor must first identify his or her goals and
desires for the money being invested. Are long-term capital gains desired, or a current
income is preferred. Will the money be used to pay for college expenses, or to
supplement a retirement that
is decades away? Identifying a goal is important because it will enable the investor
dramatically whittle down the list so many tools available in the the public domain.
In addition, investors must also consider the issue of risk tolerance. If the investor is
able to afford and mentally accept dramatic swings in portfolio value then he should go
for riskier investments. Or, if a more conservative investment warranted from the
scheme. Therefore Identifying objective preferences and risk tolerance is as important as
identifying a goal.
To finish, I would like to state that this project gave me a lot of assistance to get a hold
on the basic knowledge about the products like ULIP, saving accounts and Mutual Funds
in detailed manner and also all the mechanism, maneuver related to it.
Age
 The segment (18-25) can be a potential customer segment for the bank as most of
the people are falling in the income group of less than Rs.15000 per month.The
company can target this segment by offering its ULIP product both as an insurance
and investment product, which can provide high returns as the investments and
provide the insurance cover too, as a large segment doesn’t have an insurance
cover. The return in new Capital Unit Gain Plan is around 20% which is quite
good enough. Mutual Fund Schemes can also be offered to those respondents in
this age group who are risk takers as in mutual funds small amounts can invested.
The need is to make this segment aware of the products like ULIP (which is
73
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
promising return of 20-25% p.a.) and tap as many customers as possible. Also
Positioning of the Mutual Funds should be such that attracts customers.
 In order to tap the 25-35 years segment ULIP can be promoted as an investment
option rather than an insurance product. Mutual funds need to be promoted as only
a small segment is investing in mutual funds. Mutual funds and ULIP both can be
the best investment option for this segment.
 As the segment 35-45 years is an investing and risk taking segment, Mutual funds
promising higher returns can be promoted in this segment. The product ULIP is
also highly acceptable by this segment, so both of these products can be promoted
as a best investment options promising high returns and low risks. People in this
age group can also invest in real estate as by this age people are in the position to
invest large lump sum money for this investment.
 In the segment of 46 & above age group people be targeting for the Mutual funds
as can be seen that very few people are investing M.Fs. this is because this
segment consists of risk averters as this segment have invested in Fixed Deposits
and government securities and insurance than any other investment product as
safety is the most important factor which is being considered while investing by
this segment. But these people are neutral for these investments. These thus these
products can be promoted as safe investments and better than F.D’s only then this
segment can be tapped.
Income
 The income bracket less than Rs.15000 per month are basically safe investors
and have not and do not prefer investing in mutual funds and ULIP. Thus
positioning of these products should be such that people are attracted towards
this scheme. Emphasis on marketing of the products should be given.
74
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
 Respondents under income bracket Rs.15000-Rs.30000 have mainly invested
in insurance. But when survey was done and their preferences were asked these
respondents strongly preferred investing in these strategies.
 Income Bracket of Rs.30000-Rs.50000 is the strong contenders for investing
their money and these people have invested in real estate, insurance and fixed
deposits. Moreover there is mixed preferences for their investments thus proper
segmentation of the sample should be done accordingly marketing strategies
should be adopted.
 Though there is a small percentage of respondents in income bracket above
Rs.50000 who least prefer investing in mutual fund. But this is the segment
which can be well targeted and their portfolio should be such that gives them
more returns. The case of ULIP is different as people strongly prefer investing
in this investment strategy. Thus emphasis for selling ULIP in this income
bracket.
Occupation
The survey conducted has resulted in the observation that the business class should
be targeted for ULIP and Mutual funds as they strongly prefer investing in these
two products. These products should be positioned as safe investment and then
been sold it to service class and retirees as these investors are the safe investor.
75
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
LIMITATIONS
1. Secondary Data-Useful Financial insights are not easily available.
2. Time Constraint- Time was not sufficient to research on all the
investment tools available.
3. Primary data- The survey sample was not very large for analysis and
the major population in the sample group was middle class group
making deviation in the results and the inaccuracy of the results
because of respondent’s response.
76
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Annexure I
Saving accounts features:
Savings Account Name Accounts
CHARGES FOR OPENING THE ACCOUNT
AXcessPlus Savings Account
NIL
AVERAGE QUARTERLY (DAILY)BALANCE REQD.
Rs.10000
Rs. 1500/qtr (Bal<Rs.5000)
Rs.750/qtr(Rs.10000>Bal>Rs.50
00)
Rs.1000 per yr.
Rs.500 (within 6 months)
PENALTY FOR UNSUFFICIENT AQB
DORMANT A/C CHARGES
ACCOUNT CLOSURE
DEMAND DRAFT
DRAWN AT OWN BANK(min fee Rs.50 & max
Rs.1500)
CANCELLATION
DRAWN AT OTHER BANK( Min Fee Rs.250)
PAY ORDER
STATEMENTS
STATEMENT OF ACCOUNT,(E-STMT)
CHARGES FOR DUPLICATE STATEMENT
MONTHLY STATEMENT CHARGES
ISSUE BALANCE CONFIRMATION CERTIFICATE
CARDS
DEBIT CARD ANNUAL FEE
DEBIT CARD REPLACEMENT FEE
ATM INTERCHANGE(NON PARTNER)
SERVICES
NETBANKING
INTERBRANCH/ INTERCITY BANKING
BILLPAY
PHONE BANKING
MOBILE BANKING(SMS)
CHARGES FOR OPENING THE ACCOUNT
AVERAGE QUARTERLY (DAILY)BALANCE REQD.
PENALTY FOR UNSUFFICIENT AQB
DORMANT A/C CHARGES
ACCOUNT CLOSURE
DEMAND DRAFT
DRAWN AT OWN BANK(min fee Rs.50 & max
Rs.1500)
CANCELLATION
DRAWN AT OTHER BANK( Min Fee Rs.250)
PAY ORDER
STATEMENTS
STATEMENT OF ACCOUNT,(E-STMT)
CHARGES FOR DUPLICATE STATEMENT
MONTHLY STATEMENT CHARGES
ISSUE BALANCE CONFIRMATION CERTIFICATE
CARDS
DEBIT CARD ANNUAL FEE
DEBIT CARD REPLACEMENT FEE
ATM INTERCHANGE(NON PARTNER)
SERVICES
NETBANKING
INTERBRANCH/ INTERCITY BANKING
BILLPAY
PHONE BANKING
MOBILE BANKING(SMS)
0.25%
Rs 250
SuperValue Savings Account
NIL
Rs 50,000
Rs. 1250/qtr (Rs.5000<=Bal<10k)
Rs.1250/qtr(Rs.10000>Bal>Rs.5000)
Rs.1000 per yr.
Rs.500 (within 6 months)
FREE
Rs.250
0.30%
0.25%
Rs.75
FREE
FREE/qtr
Rs.100
Rs.100
Free for 1st Yr yr,250/yr
FREE/qtr
Rs.100
FREE
Free for 1st Yr yr,250/yr
Rs.200 per year
Rs.200
Free for first 4 transactions per
month/ Rs.50 for beyond 4 trans.
FREE
Rs.200
FREE
Rs.50
FREE
FREE
NOT AVAILABLE
NIL
Rs.10000
Rs. 1500/qtr (Bal<Rs.5000)
Rs.750/qtr(Rs.10000>Bal>Rs.50
00)
Rs.1000 per yr.
Rs.500 (within 6 months)
0.25%
Rs 250
NIL
Rs 50,000
Rs. 1250/qtr (Rs.5000<=Bal<10k)
Rs.1250/qtr(Rs.10000>Bal>Rs.5000)
Rs.1000 per yr.
Rs.500 (within 6 months)
FREE
Rs.250
0.30%
0.25%
Rs.75
FREE
FREE/qtr
Rs.100
Rs.100
Free for 1st Yr yr,250/yr
FREE/qtr
Rs.100
FREE
Free for 1st Yr yr,250/yr
Rs.200 per year
Rs.200
Free for first 4 transactions per
month/ Rs.50 for beyond 4 trans.
FREE
Rs.200
FREE
Rs.50
FREE
FREE
NOT AVAILABLE
77
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Annexure II
Saving account comparison
Average Quaterly Balance
(AQB)/ADB(average daily
balance)
Charges on non maintainance
of balance Quaterly
AQB<Rs. 5000
Rs. 5000<= AQB< Rs. 7,500
Rs. 7,500<= AQB< Rs. 10,000
GENERAL CHARGES
ACCOUNT STATEMENTS
QUATERLY STATEMENTS
ADDITIONAL STATEMENTS (UPTO
6 MONTHS)
HALF YEARLY STATEMENTS
MONTHLY STATEMENTS
MONTHY E-STATEMENTS
PAYEE DETAILS
PASS BOOK
CHEQUE BOOK
PERSONALIZED CHEQUE BOOK
MULTICITY CHEQUE BOOK
ATM USAGE CHARGES
BANK's ATM's IN INDIA
OTHER VISA ATM's WITHIN INDIA
Balance enquiry
withdrawal limit (non gold)
withdrawal limit (gold)
DEBIT CARD
ANNUAL FEES
REPLACEMENT OF DEBIT CARD
GOLD DEBIT CARD ANNUAL FEE
debit card spending limit(gold)
DEBIT CARD SPENDING LIMIT
(NON GOLD)
STANDING INSTRUCTIONS
Setting up Charges
Execution fee
BANKER's REPORT
Signature Verification
TDS certificates
OUTSTATION CHEQUE
COLLECTION
CHEQUE DRAWN ON ANY OF OUR
BRANCHES
CHEQUE DRAWN ON
ANOTHER BANK
OUR BRANCH LOCATIONS
SPEED COLLECTION LOCATIONS
OTHER COLLECTION LOCATIONS
FOREIGN CURRENCY CHEQUE
HANDLING CHARGES
FROM OTHER BANKS
LOCAL CURRENCY
CHEQUE COLLECTION
Standard Chartered(AXESSPLUS
SAVINGS A/C)
Rs. 10,000
ABN AMBRO(flex plus)
10,000
Rs. 1,500
Rs. 1,250
Rs. 750
Rs. 500 p.m.
Rs. 400 p.m.
Rs. 300 p.m.
FREE
FREE
Rs. 165 (FOR 1 MONTH
Free
Rs. 25
FREE)
FREE
Free
Free
Free
Rs. 200
FREE
FREE
FREE
FREE 1st 4 TRANSACTIONS PER
MONTH
Rs. 50 PER TRANSACTION
Rs. 20 FREE ON ALL TRANSACTIONS
Rs. 200
Rs. 100
Rs. 100
Rs. 25
Rs. 50
Rs. 25 PER EXTERNAL DOCUMENT
Free
Rs. 50 per transaction(MASTER
CARD/cirrus and UTI bank's ATMs)
Rs. 5
Rs. 50000
Rs. 100000
Rs.
Rs.
Rs.
Rs.
Rs.
180
200
400
100000
50000
Rs. 50
Rs. 250
Rs. 50
free or Rs. 50 for addition
minimum Rs. 50 or .25%
FREE
FREE
Rs. 50
0.3% MINIMUM FEES OF Rs.
150+OTHER ADDITIONAL CHARGES
MINIMUM FEES Rs. 100 OR 0.25%
minimum Rs. 150 or .25%
Rs. 50
78
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
FOREIGN CURRENCY
CHEQUE COLLECTION
REMITTANCES
NATIONAL
ELECTRONIC FUND TRANSFER
INWARD
Rs. 100
OUTWARD
REAL TIME GROSS
SETTLEMENT TRANSFER
INWARD
OUTWARD (MIN. Rs. 250,
MAX Rs. 1000)
PAY ORDER/DD
DRAWN ON OUR BRANCHES
FREE
DD DRAWN ON
CORROSPONDENT BANKS
FOREIGN CURRENCY DD
CANCELLATION/REVAL
IDATION
DD/DEMAND ORDER
LOST/DUPLICATE
INSTRUMENT
FUNDS TRANSFER
TRANSMISSION IN
FOREIGN CRRENCY
REMITTANCES UPTO USD
50,000 OR EQUIVALENT
REMITTANCES ABOVE
USD 50,000 OR EQUIVALENT
REMITANCES FROM ABROAD
TRAVELLERS CHEQUES
ISSUANCE(MINIMUM Rs. 100)
ENCASHMENT
ADDITIONAL FEATURES
doorstep banking
courier pick up and
delivery(non cash)
cash delivery(1000-100000)
demand draft delivery
FREE
Rs. 100
0.25%
FREE UPTO 2 PER
MONTH(MIN FEE Rs. 50 MAX Rs.
1500 OR 0.10%)
0.15%
Rs. 750
EXTRA
minimum Rs 150 or .25%
(to correspondent banks)
0.25%
0.25%
Rs. 50
minimum Rs. 50 or .25%
Rs. 200
Rs. 50
Rs. 250
Rs. 250+ BANK CHARGES
Rs. 250
Rs. 500
Rs. 1000
Rs. 250
Rs. 250
1%
Rs. 100
1%
1 per day free(Rs. 25 per
transaction)
1 per day free (Rs. 50 per
transaction)
Rs. 50 per transaction
79
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
AnnexureIII
Features
Policy Name
Age
Minimum age at entry
Maximum age at entry
Risk covered for age between
Premium Amount (minimum)
Annual
Half-Yearly
Quarterly
Monthly
Single premium payment
Maximum Assured Amount
Minimum Assured Amount
Bajaj Allianz (Ulip)
Capital Unit Gain
ICICI
Life time Plus
0 Yrs (Risk commences at age 7)
60 Yrs
7-70 years
0
65
0-75
Rs.10000
20000
Available
Available
Rs.1000 (Rs.5000 for top up)
Available
Y times the annual prem. depending on age
Age
Y (times)
0-30
100
31-35
85
36-40
70
41-45
50
46-55
30
56-60
20
0.5 times the Policy Term times Annualised
Premium.
Regular Premium allocation
<Rs. 35000
Rs.35000-Rs.99999
Rs. 100000-Rs.149999
Allocation charge in %
Rs.150000-Rs.2499999
Rs.2500000-Rs.9999999
Rs.10000000-Rs.4999999
Rs.5000000&above
Benefits offered
Death Benefit
Before Age of 7 yrs
Rs.199999), 96%
Available
Annual Premium* (Term/2)
Annual Premium* (Term/2)
annual premium
Allocation rate
95%
95%
95%
73%
73%
99%
95%(Uptil
Between age of 7 yrs & 60 yrs
On & after 60 yrs
Maturity Benefit
Minimum partial withdrawl
amount
(at bid price)
Investment Options
Minimum Balance across all funds
Tax Benefits
Sec 80(c)
Sec 10(10(d))
99%
96%
97%
97%
Sum Assured or Fund Value
Fund value
Sum assured less partial withdrawls/ fund value on
as on date of intimation
Sum assured less partial withdrawls/ fund value on
as on date of intimation
Fund value
Fund Value
Rs.5000
Rs.2,000
Liquid Fund- Risk profile –Low
Bond Fund- Risk profile- Moderate
Equity Growth Fund- Risk Profile- Very High
Equity Index Fund II- Risk profile- High
Accelerator Mid-Cap Fund – Risk profile- Very High
Rs.10000
Flexi Growth II
Maximiser II
Flexi Balanced II
Balancer II
Protector II
Preserver
Rs.10000
Save upto Rs.33660 each
year as prem. Upto Rs.100000
are allowed as a deduction
Benefits are tax free
Save upto Rs.33660 each
year as prem. Upto Rs.100000
are allowed as a deduction
Benefits are tax free
80
MUTUAL FUNDS AND OTHER INVESTMENT TOOLS COMPARITIVE ANALYSIS AND INVESTMENT STRATEGIES
Charges
Annual Mortality charges
Annual Administration charges
Annual Fund Management charges
No. of free switches annually
Charges for additional switches
Minimum Switch amount
Minimum Top-up premium
Top up allocation
Flexibiliy
To increase premium
To pay top up premiums
To decrease premium
Cancellation or surrender charges
Depending on your age
charged every month
Rs.600p.a. per policy
2.75%p.a.of the NAV for Equity growth fund &
Accelerator MidCap Fund
2.25%p.a.for Equity Index Fund II
Cont:
1.75%p.a.for Liquid Fund Bond Fund
3
Rs.200/ 5% of switch amount (which ever is lower)
Rs.5000 or Fund value(lower)
Rs.1000
100%
every 3rd year upto 5 times of revised regular prem
/ half of the term times revised reglr prem (which
ever is lower)
Level of top up prem.
Between 1.25 times to 5 times
Proportionate decrease of sum assured (Reduced
regular prem. Not to be less than regular prem.)
100 % penalty on partial or full withdrawal before
completion of firt three years
Depending sum Assured
Rs.60 per month
1.5%p.a. Flexi Growth II
1.5%p.a. Maximiser II
Cont:
1.0%p.a. Flexi Balanced II
1.0%p.a. Balancer II
0 .75%p.a.Protector II
0.75%p.a. Preserver
4
Rs.100 of switch amount
2000
NA
NA
not available
not applicable
Available
Available
81