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A

Project Report
On
Systematic Investments Plan
Submitted in Partial Fulfilment of award of Post-Graduation diploma in General
Management
Submitted by
Pankaj Pawar
DPGD/AP13/0777
Under the Guidances of
Prin.L.N. Welingkar Institute of Managements Development & Research

Acknowledgement
With Immense pleasure I would like to present this report on
Systematic Investment Plan

I would like to thank Welingkar Institute of Management for providing me the


opportunity to present this project.
My special thanks to Ms. Rakhi Kubal for her invaluable guidances, co-operation &
for taking time from her busy schedule.
Acknowledgements to my friends & those who have helped me in the project.

Pankaj Pawar

Declaration
Thereby declare the project entitled Systematic Investment Plan submitted in
partial fulfilment of post graduate diploma of Welingkar Institute of
Management Development & Research is based on primary & secondary
data found by me in various books, magazine & website which been
collected by me under the guidance of Ms. Rakhi Kubal.

Date:

Pankaj Pawar
DPGD\AP13\0777

Certificate from the guidance


This is to certify the project work titled Systematic Investment Plan is a
Bonafide work carried out by Pankaj Pawar (DPGD/AP13/0777) a candidate
from Welingkar Institute of Management under my directions & guidances.

Name of project
guidance
Ms.Rakhi Kubal
Signature:
DATE:

Introduction:
A mutual fund is a trust that pools the savings of a number of investors who
share common financial goal .the money thus collected is then invested in
the capital market such as shares, debentures and other securities. The
income earned through these investments and the capital appreciation
realized is shared by its unit holders in proportion to the number of units
owned by them.

The plan of investing the same amount of money every month over an
extended period of time regardless of whether the market is up or down is
known as Systematic Investment Plan (SIP).
Systematic Investment Plan (SIP) is a financial planning tool that helps
you to create wealth, by investing small sums of money every month, over a
period of time. A Systematic Investment Plan (SIP) is a vehicle offered
by mutual funds to help investors invest regularly in a disciplined manner.
SIP is a good tool that retail investors can utilizes for optimize their
investments strategy. SIP is nothing but simple method of investing a fixed
sum of money in specific investment scheme, on a regular basis for predetermined period of time. A recurring deposit in post office or in bank is also
an SIP. Systematic Investment plan were already famous & proven in Mutual
funds context but now SIP has already approached in Equity stocks.
Investing in Mutual funds is not everybody cup of Tea, Being depending on
the factor of fluctuating stock market & risking youre hard earned money for
a measly profit that does not really help.
A Systematic Investment Plan or SIP is a smart and hassle free mode for
investing money in mutual funds. SIP allows you to invest a certain predetermined amount at a regular interval (weekly, monthly, quarterly, etc.). A
SIP is a planned approach towards investments and helps you inculcate the
habit of saving and building wealth for the future\
Considered to be safest way to invest into Equity Markets by going the SIP
route, Investor is not trying to capture the Highs & Lows of the market, but
trying to average the cost by investing at regular interval.
Concept is that when markets fall investor gets more units, likewise investor
acquires lesser units when the market goes up. This means that investor
buys that investor buys less when the price is high & investor buys more
when the price is low. Hence the average cost per unit fall down over the
period of time.

Mutual Fund gives us four reasons for investing through SIP:

Lighter on the wallet


Makes timing of market irrelevant
Helps build for future by the power of compounding
Rupee cost averaging lowers your chances of losses.

Rupee cost averaging is an effective market-timer mechanism that


eliminates the need to time the markets. All one has to do is to invest a
fixed, pre-decided amount of money on a regular basis over a long period of
time. Since the amount invested per month is constant, one buys more units
when the price is low and fewer units when the price is high. As a result the
average unit cost will always be less than the average sale price per unit,
irrespective of the market rising, falling or fluctuating.
The invested money can be utilized in three types of markets those are:
Equity market
Debt market.
Money market.
Equity market in India consists of:
Shares.
Equity related securities
Debt

Market in India consists of:


Government of India securities.
Bonds.
Debentures.
Treasury Bills.
Commercial papers.

Again Money market in India consists of:


Call.
Repurchase Agreement (REPO).
A mature financial system has to gear up and undergo varied and
comprehensive changes in order to achieve rapid economic development.
Mutual funds have emerged as a strong financial intermediary and are the
fastest growing segment of the financial services sector in India. It aims at
promoting a diversified, efficient and competitive financial sector increasing
the return on investment and promoting and accelerating the growth of the
economy. It is a medium of investment suitable to the small investors, who
are not able to invest in stock market directly.
Mutual funds now play a very significant role in channelizing the savings of
millions of individuals. The mutual fund industry in India over the years has
seen dramatic improvements in terms of quantity as well as quality of
product and service offerings in recent years. The tremendous growth of
Indian Mutual Funds industry is an indicator of India efficient financial market
and the trust which investors have on the regulatory Environment.

Advantages of Mutual Fund:

Diversification.
Professional Management.
Regulatory oversight.
Liquidity.
Low cost.
Conveniences.
Transparency.
Flexibility.

What is Systematic Investment Plan?


Systematic Investment Plan (SIP) is a smart financial planning tool that helps you to
create wealth, by investing small sums of money every month, over a period of
time. Systematic Investment Plan (SIP) is a planned approach to investments and an
investment technique that allows you to provide for the future by investing small
amounts of money in Mutual Fund schemes of your choice.
A SIP is a method of investing in mutual funds, by investing a fixed sum at a regular
frequency, to buy units of a mutual fund schemes. It is quite similar to a recurring
deposit of a bank or post office. For the convenience, an investor could start a SIP
with as low as Rs 500; however this amount may differ from one fund house to
other. The SIP provides them a way to invest in the fund of their choice in
installments.

SIP is a method of investing a fixed sum, regularly, in a mutual fund scheme.


SIP allows one to buy units on a given date each month, so that one can
implement a saving plan for themselves. The biggest advantage of SIP is that
one need not time the market. In timing the market, one can miss the larger
rally and may stay out while markets were doing well or may enter at a
wrong time when either valuation have peaked or markets are on the verge

of declining. Rather than timing the market, investing every month will
ensure that one is invested at the high and the low, and make the best out of
an opportunity that could be tough to predict in advance.
An investor can invest a pre-determined fixed amount in a scheme every
month or quarterly, depending on his convenience through post-dated
cheques or through ECS (auto-debit) facility. Investors need to fill up an
Application form and SIP mandate form on which they need to indicate their
choice for the SIP date (on which the amount will be invested). Subsequent
SIPs will be auto-debited through a standing instruction given or post-dated
cheques. The forms and cheques can be submitted to the office of the Mutual
Fund / Investor Service Centre or nearest service Centre of the Registrar &
Transfer Agent. The amount is invested at the closing Net Asset Value (NAV)
of the date of realization of the cheques.
A fund typically buys a diversified portfolio of stock, bonds & money market
securities, or a combination of stock and bonds, depending on the
investment objectives of the fund. Mutual funds may also hold other
investments, such as derivatives. A fund that makes a continuous offering of
its shares to the public & will buy any shares an investor wishes to redeem,
or sell back, is known as an open-end fund. An open-end fund trades at net
asset value (NAV).An investment vehicle that is made up of a pool of funds
collected from many investors for the purpose of investing in securities such
as stocks, bonds, money market instruments and similar assets. Mutual
funds are operated by money managers, who invest the funds capital and
attempt to produce capital gains & income for the funds investors. A mutual
funds portfolio is structured and maintained to match the investment
objectives stated in its prospectus.

The important terms of the figure are explained as follows:

Fund Sponsor: The sponsor is the company which sets up the mutual
fund. It means anybody corporate acting alone or in combination with
another body corporate established a mutual fund after initiating and
completing the formalities.

Trust: MF or trust can either be managed by the Board of Trustees,


which is a body of individuals, or by a Trust Company, which is a
corporate body. Most of the funds in India are managed by Board of
Trustees. The trustee being the primary guardian of the unit holders
funds and assets has to be a person of high repute & integrity. The
trustees, however, do not directly manage the portfolio securities. The
portfolio is managed by the AMC as per the defined objectives,
accordance with Trust Deed and SEBI (Mutual Funds) Regulations. Asset
Management Company (AMC) the AMC, which is appointed by the
sponsor or the trustees and approved by SEBI, acts like the investment
manager of the trust. The AMC functions under the supervision of its
own Board of Directors, and also under the direction of the trustees
and SEBI. AMC, in the name of the trust, floats and manages the
different investment schemes as per the SEBI Regulations and as per
the Investment Management Agreement signed with the Trustees.

Other: Apart from these, the MF has some other fund constituents,
such as custodians and depositories, banks, transfer agents and
distributors. The custodian is appointed for safe keeping of securities
and participating in the clearing system through approved depository.
The bankers handle the financial dealings of the fund. Transfer agents
are responsible for issue &redemption of units of MF.

Risk Return Matrix: The risk return trade-off indicates that if investor is
willing to take higher risk then correspondingly he can expect higher
returns and vice versa if he pertains to lower risk instruments, which
would be satisfied by lower returns. For example, if an investor opts 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. Thus investors
choose mutual funds as their primary means of investing, as Mutual
funds provide professional management, diversification, convenience
and liquidity. That doesnt mean mutual fund investments are 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.

Mutual funds can be classified as follow:

Based on their structure:

Open-ended funds: Investors can buy and sell the units from the
fund, at any point of time.
Close-ended funds: These funds raise money from investors only
once. Therefore, after the offer period, fresh investments cannot
be made into the fund. If the fund is listed on a stocks exchange
the units can be traded like stocks (E.g., Morgan Stanley Growth

Fund). Recently, most of the New Fund Offers of close-ended


funds provided liquidity window on a periodic basis such as
monthly or weekly. Redemption of units can be made during
specified intervals. Therefore, such funds have relatively low
liquidity.

Based on their investment objective:

Equity funds: These funds invest in equities and equity related


instruments. With fluctuating share prices, such funds show volatile
performance, even losses. However, short term fluctuations in the
market, generally smoothens out in the long term, thereby offering
higher returns at relatively lower volatility. At the same time, such
funds can yield great capital appreciation as, historically, equities have
outperformed all asset classes in the long term. Hence, investment in
equity funds should be considered for a period of at least 3-5 years.

It can be further classified as:o Index funds- In this case a key stock market index, like BSE
Sensex or Nifty is tracked. Their portfolio mirrors the benchmark
index both in terms of composition & individual stock weight
ages.
o Equity diversified funds- 100% of the capital is invested in
equities spreading across different sectors and stocks.
o Dividend yield funds- it is similar to the equity diversified funds
except that they invest in companies offering high dividend
yields.
o Thematic funds- Invest 100% of the assets in sectors which are
related through some theme .e.g. -An infrastructure fund invests
in power, construction, cements sectors etc.
o

Sector funds- Invest 100% of the capital in a specific sector. e.g.


- A banking sector fund will invest in banking stocks.

o ELSS- Equity Linked Saving Scheme provides tax benefit to the


investors. Balanced fund: Their investment portfolio includes
both debt and equity. As a result, on the risk-return ladder, they
fall between equity and debt funds. Balanced funds are the ideal

mutual funds vehicle for investors who prefer spreading their risk
across various instruments. Following are balanced funds classes.

SIP (Systematic Investment Planning)


Valuable for the investor who wants to get his/her investments going, but does not
have large sums of money to invest. Systematic investing offers a disciplined way to
invest a portion of your income, at regular intervals, without trying to time the
market or second-guess the market and thereby: SIP protects you from extreme
fluctuations in the market and its effect on your investment's growth, over time, can
be nothing short of amazing. SIP offers several advantages that may boost your
chances of achieving your key goals.
SIP mainly helps us to get addicted to an investment principles:
Income Savings = Expenditure, Instead of following the principle of
Income Expenditure = Savings.
SIP can be used in any type of mutual funds, equity or fixed income. This strategy is
best used in an equity fund where an investor can capture the volatility in the
equity markets to reduce the cost of investment. The NAV of any funds is
determined by the market price of the stocks the fund has invested in. SIP allow you
to invest a fixed amount regularly, so when funds NAV is more you get less units &
when funds NAV is higher you get less units, so over a longer time frame, SIP will
lower the average purchase cost of an investment.
Concept of SIP:
Just like banks & post office offers recurring deposit schemes, mutual funds offer an
SIP option. Investors opting for an SIP option commit investing a pre-specified sum
of money at regular intervals in a particular mutual fund scheme. Each perioidic
investment entitles investors to receive units of that mutual fund scheme, which is
subject to its NAV prevailing that time.

Working of SIP:
Let us take an example to understand how an SIP works. Suppose X decides to
invest in a mutual funs through SIP. He commits making an monthly investments of
Rs.1000 for an period of twelve month in a fund names ABC. The payment can be
done by issuing twelve post dated cheques of Rs.1000 each or through ECS facility
Date
01-Jan
01Feb
01Mar
01-Apr
01May
01-Jun
01-Jul
01Aug
01Sep
01Oct
01Nov
01Dec

Monthly Investment
(a)

NAV (b)

Number of units
(a)/(b)

Rs.1000

46.29

21.603

Rs.1000

48.08

20.799

Rs.1000

52.78

18.947

Rs.1000

56.36

17.743

Rs.1000

58.42

17.117

Rs.1000
Rs.1000

56.42
62.14

17.724
16.093

Rs.1000

67.58

14.797

Rs.1000

71.7

13.947

Rs.1000

76.19

13.125

Rs.1000

83.97

11.909

Rs.1000

89.92

11.121

Brief Summary:
Monthly Investment: Rs.1000
Period of investment: 12 months

Total amount invested: Rs.12, 000


Total number of units credited to X: 194.925
Average cost/units: Rs.61.5621
Note: Entry & exit load are applicable while investing through SIP option also.
However in this example, load has not been taken into consideration for the purpose
of simplification.
Benefits to X
Convince & Affordability of its easy payment mode.
Helps X to develop the habit if disciplined investing as he/she is compelled to fulfill
hi/her commitment of making a fixed payment every month.
Rupee cost average benefit- By Investing through SIP route, X receive 194.925 units
at an average cost of Rs. 61.5621. However has X invested the whole of Rs.12000
at one go, he would have received a different number of units. Suppose X had
invested an Rs.12000 on:
01 Jan 2015- He would have received 259.24 units.
01 Jul 2015- He would have received 193.11 units
01 Dec 2015- He would have received 133.45 units
Since, it is not simple for anybody to perfectly time the market: it make a more
sensible approach to invest through SIP option for an long term say 03 to 05 yrs. It
actually makes the volatility in the stock markets work to investors. This example
helps us to understand how SIP allows X to take benefits of all highs & lows of the
market during this twelve month time period.
Flexibility to redeem units at any time or making a change in the monthly
investment amount.

Features of SIP
One can choose to invest in Equity or Debt Mutual funds while doing a SIP.
SIP is the best way to create long-term wealth with small investments.
Some of the main features of SIP are-

Periodic Investing - Investor can choose different periods varying


from Daily, weekly, bimonthly or monthly. However as per market
data 95% of investors have done SIP with monthly contributions.

Auto debit - There is no need to issue payment every month in SIP.


One has to give direct debit mandate to Mutual Fund Company or postdated cheques and bank account get debited on the dates selected by
the investor.

Amount - One can choose amount as low as Rs 100 and can have any
amount beyond that.

Multiple SIP - Investor can have any number of SIPs as per


individuals capacity of investing.

Flexibility - One can close SIP any time as per convenience. For this
simple communication has to be made to Mutual Fund Company.

Investment - Investment can be made in Equity or debt mutual fund


and has to be decided at the start if SIP.

Minimum Duration of SIP - Usually it is 6 months. It can differ with


each Mutual fund company

Maximum duration of SIP - SIP can be of any duration. One can also
choose perpetual SIP, where one can invest on a periodic basis till
communication to stop investment by the investor to mutual fund
house.

Dates of investing - Usually date of investing differs from one Mutual


fund house to other, however usually dates offered are 1, 7, 10, 15, 20
and 28.

No lock in - Usually there is No lock in period in SIP. One can redeem


mutual fund investment anytime.

Benefits of SIP:

Investments are consistent & steady.


Power of compounding: More the length of investment, more the
earnings.

Power of Rupee Cost Averaging: Market volatility shall work wonders


for you.
Its an entirely mechanized process & involves no complications.
It enables to overcome spending & encourages savings, thereby
securing future.
It will not cause strain on one budget as investment amount can be so
less than one does not realizes its being withheld.

Power of Compounding:
First Principle: There is no such thing as simple interest

Simply put, compounding refers to the re-investment of income at the same


rate of return to constantly grow the principal amount, year after year.
Cumulative fixed deposits are a prime example of compounding at work,
wherein the total interest that you get paid for the period is in excess of the
rate of interest multiplied by the period of the deposit.
You often see advertisements taken by borrowers of money (e.g., banks,
finance companies, manufacturing companies, etc) who promise you rates of

return that seem to be far in excess of prevailing interest rates. These


advertisements are very often misleading because what the borrower is
referring to is the simple interest that you will earn during the period of your
investment. And not the `rate of interest' that is being compounded each
year. Which brings us to the first principle of compounding. `There is no such
thing as simple interest'.
And it would help your financial cause a great deal if you applied this
principle when you invest or lend money. Because anyone who lends you
money is sure to apply it!!
Second Principle: The smallest rate differential has a BIG impact
over time

Would you care too much whether your rate of return is 12% or 14%? The
fact is that if you did, it would make a big difference to your wealth as time
progresses. The benefit from compounding arises primarily from the fact that
income keeps growing the principal to generate higher absolute returns each
year. Higher rates of return or longer investment time periods increase the
principal amount in geometric proportions.
The table below shows you how a single investment of Rs100 will grow at
various rates of return. 5% is what you might get by leaving your money in a
savings bank account, 10% is typically the rate of return you could expect
from a one-year bank fixed deposit, 15% is what you could expect by
investing in relatively riskier company fixed deposits and 20% or more is
what you might get if you prudently invest in equity shares.
The Impact of Power of Compounding

Use the table below, to see the impact of the power of compounding with
different rates of return and different time periods.
At end of
Year
1

5%

10%

15%

20%

Rs10

Rs110

Rs115

Rs120

5
5

Rs12
8

Rs161

Rs201

Rs249

10

Rs16
3

Rs259

Rs405

Rs619

15

Rs20
8

Rs418

Rs814

Rs154
1

25

Rs33 Rs1,08 Rs3,29 Rs9,54


9
3
2
0

By now, you've probably figured out the obvious conclusion from the above
table.
It is literally 'a waste of time and money' to let your wealth lie in low-income
investments for prolonged periods of time. For shorter periods of time,
although different rates of return do result in different wealth levels, the
impact is not earth shattering. However, the longer the period for which the
investment is made (say over 10 years in our above example) the difference
just cannot be ignored!
And yes, the next time you plan to borrow money, remember that
compounding is busy working against you. Make sure you are conscious
about the cost of your borrowing. Every time your credit card payment is
running overdue, you are not paying just 2% per month in interest cost, you
are actually paying 26.8% per annum!!!
We continue our discussion of the impact of the power of compounding on
account of inflation and taxes and hence on your financial wealth in our
article Running To Stand Still.
In Benefits of Starting To Invest Early we discuss how, because of the Power
of Compounding, it makes a lot of sense for you to start investing right now.

Disadvantages of SIP:

It is not a tax saving option.


It is not an investment option. The SIP vs ELSS or SIP vs Mutual
comparison is not justified. Any mutual fund investment can be done
through the SIP method.
The SIP way of investment has no relation to the return.
You cant change the regular investment amount during the SIP period. To
alter the investment amount you need to start an additional SIP or close
the existing SIP.
Limited options of dates: For a SIP in Mutual Fund you need to decide a
date in advance when you like to do your SIP and give an ECS mandate
for the same. Most of the MFs have limited option (mainly 1st, 5th, 7th,
10th, 15th, etc.). So you tend to invest in multiple mutual funds on the
same date. You want to lessen your risk by spreading your SIP in the
entire month by choosing different dates for different funds.
Fixed Amount: There are times when you feel that markets are
undervalued and you want to invest more but then in SIP only a
predetermined fixed sum gets invested. Same is the case when you want
to invest less, you cant do it.
Stopping intermediate payment: It may so happen that you got an
emergency or have a major expense this month and so you dont want to
invest. But with SIP this is not possible; if theres money in your bank it
will get debited and invested. The only way out is to cancel the SIP which
can be a nightmare if you have a lot of SIPs and also when you want to
start again you need to go through all the formalities to start the SIP. Also
for cancellation you need to inform 2 weeks in advance and even then
you may not be sure that SIP would not be debited.
Lot of delay between actual application & start/stop of SIP: I feel this is
very irritating and you may miss one monthly installment; MF houses
need at least a month to start a SIP and around two weeks to stop your
SIP. I think its the time they should try to come up with quicker
processing of SIPs.
Does not suit people with unpredictable cash flows: Think of someone who
doesnt have a predictable cash flow like a self-employed professional. He

wont be able to do SIP as he would be unable to commit a fixed sum


every month.

Investment Strategies:
i.

ii.
iii.

Systematic Investment Plan: under this a fixed sum is invested each month
on a fixed date of a month. Payment is made through postdated cheques or
direct debit facilities. The investor gets fewer units when the NAV is high and
more units when the NAV is low. This is called as the benefit of Rupee Cost
Averaging (RCA)
Systematic Transfer Plan: under this an investor invest in debt oriented fund
& give instructions to transfer a fixed sum, at a fixed interval, to an equity
scheme of the same mutual fund.
Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual
fund then he can withdraw a fixed amount each month.

Options Available To Investors: Each plan of every mutual fund has three options
Growth, Dividend and dividend reinvestment.
Separate NAV are calculated for each scheme.
a. Dividend Option Under the dividend plan dividend are usually declared
on quarterly or annual basis. Mutual fund reserves the right to change
the frequency of dividend declared.
b. Dividend reinvestment option: Instead of remittances of units through
payouts, Units holder may choose to invest the entire dividend in
additional units of the scheme at NAV related prices of the next
working day after the record date. No sales or entry load is levied on
dividend reinvest.
c. Growth Option: Under this, plan returns accrue to the investor in the
form of capital appreciation as reflected in the NAV. The scheme will
not declare the dividend under the Growth plan & investors who opt for
this plan will not receive any income from the scheme. Instead of
income earned on their units will remain invested within the scheme
and will be reflected in the NAV.

BANKS V/S MUTUAL FUNDS:


Mutual Funds are now also competing with commercial banks in the race for retail
investors savings and corporate float money. The power shift towards mutual funds
has becomes obvious. The coming few years will show that the traditional saving
avenues are losing out in the current scenario. Many investors are realizing that
investments in savings accounts are as good as locking up their deposits in a closet.
The fund mobilization trend by mutual funds indicates that money is going to
mutual fund in a big way. Bank fixed deposits are similar to company fixed deposits.
The major difference is that banks are generally more stringently regulated than
companies.
Category

Banks

Mutual Funds

Returns
Administrative Expe.
Risk
Investment Options

Low
High
Low
Less

Network

High Penetration

Liquidity
Quality of assets

At a cost
Not transparent
Minimum balance
between
10th & 30th of every
month
Maximum Rs.01 Lacs
on
deposits

High
Low
Moderate
More
Low but
improve
Better
Transparent

Interest calculation

Guarantee

Everyday

None

Bonds and Debentures versus Mutual


Funds:
As in the case of fixed deposits, credit rating of the bond / debenture is an
indication of the inherent default risk in the investment. However, unlike FD, bonds
and debentures are transferable securities. While an investor may have an early
encashment option from the issuer (for instance through a put option), generally
liquidity is through a listing in the market.
Implications of this are:

If the security does not get traded in the market, then the liquidity remains
on paper. In this respect, an open-end scheme offering continuous sale / repurchase option is superior.
The value that the investor would realize in an early exit is subject to market
risk. The investor could have a capital gain or a capital loss. This aspect is
similar to a MF scheme. It is possible for a professional investor to earn
attractive returns by directly investing in the debt market, and actively
managing the positions. Given the market realities in India, it is difficult for
most investors to actively manage their debt portfolio. Further, at times, it is
difficult to execute trades in the debt market even when the transaction size
is as high as Rs 1crore. In this respect, investment in a debt scheme would be
beneficial. Debt securities could be backed by a hypothecation or mortgage
of identified fixed and / or current assets (secured bonds / debentures). In
such a case, if there is a default, the identified assets become available for
meeting redemption requirements. An unsecure dbond /debenture is for all
practical purposes like a fixed deposit, as far as access to assets is
concerned. The investments of a mutual fund scheme are held by a custodian
for the benefit of investors in the scheme. Thus, the securities that relate to a
scheme are ring-fenced for the benefit of its investors.

Advantages of Stock over Mutual Funds:

The opposite of the diversification issue: If you own just one stock and it
doubles, you are up 100%. If a mutual fund owns 50 stocks and one doubles,
it is up 2%. On the other hand, if you own just one stock and it drops in half,
you are down 50% but the mutual fund is down1%. Cuts both ways.
If you hold your stocks several years, you arent nicked a 1% or so
management fee every year (although some brokerage firms charge if there
arent enough trades).
You can take your profits when you want to and wont inadvertently buy a tax
liability.(This refers to the common practice among funds of distributing
capital gains around November or December of each year. See the article
elsewhere in this FAQ for more details.)
You can do a covered write option strategy. (See the article on options on
stocks for more details.)
You can structure your portfolio differently from any existing mutual fund
portfolio.(Although with the current universe of funds Im not certain what
could possibly be missing out there!)
You can buy smaller cap stocks which arent suitable for mutual funds to
invest in.
You have a potential profit opportunity by shorting stocks. (You cannot, in
general, short mutual funds.)

The argument is offered that the funds have a "herd" mentality and they all
end up owning the same stocks. You may be able to pick stocks better.

Life Insurance versus Mutual Fund:


Life insurance is a hedge against risk and not really an investment option. So, it
would be wrong to compare life insurance against any other financial product.
Occasionally on account of market inefficiencies or miss-pricing of products in India,
life insurance products have offered a return that is higher than a comparable
safe fixed return security thus, you are effectively paid for getting insured! Such
opportunities are not sustainable in the long run.

Here is an illustration using hypothetical figures indicating how the SIP can work for
investors:
Suppose an investor would like to invest Rs.4,000 under the Systematic Investment
Plan on quarterly basis.
28. Period Invested Premium NAV of Maxi Units allocated miser Fund (Rs (Rs) per
unit)7th April10 4000 11.34 352.737th May10 4000 11.01 363.317th June10
4000 12.05 331.957th July10 4000 13.13 304.657th 4000 13.67
292.61August107th Sept10 4000 15.81 253.007th Oct10 4000 16.78 238.387th
Nov10 4000 18.28 218.827th Dec10 4000 18.71 213.797th Jan11 4000 21.48
186.227th Feb11 4000 21.49 186.137th 4000 21.98 181.98March11Total 48000
Actual average NAV=
(11.34+11.01+12.05+13.13+13.67+15.81+16.78+18.28+18.71+21.48+21.49+21
. 98) / 12 = 16.29 NAV for Mr. X (4,000 * 12) / (352.73+ 363.31 + 331.95 + 304.65
+ 292.61 + 253.00+ 238.38 + 218.82 + 213.79 + 186.22 + 186.13+ 183.74) =
Rs.15.36
29. Based on the historical analysis for BSE Sensex for last 10 to 12 years (i.e.1-Jan1998to 1-Jan- have 2010) we find that if an individual had invested Rs. 1000 ever
year (SIP)he would by earned a return of 9% vis--vis 5% earned an individual who
had investedRs. 1000 at the beginning of 10 year period. Similarly over a five-year
period (1-Jan-1994 to 1-Jan-1999) SIP investment return would have been 16.52%
compared to14.09% for a one-time investment at the beginning of the period.Using
the SIP strategy the investor can reduce his average cost per unit. The investorgets
the advantage of getting more units when the market is turned down.Benefits of SIP
1. SIP can be started with a minimum investment of Rs. 500/- per month or Rs.
1000/- per month. 2. It is good and effective way of creating wealth for long term. 3.
ECS facility is available in case of Investment through SIP. 4. A small withdrawal
from the account doesnt affect the bank balance of an individual as compared to a
hefty withdrawal. 5. It can be for a year, two years, three years etc. if a person at
any point of time couldnt be able to continue its SIP, he may give instructions at
least 25 days before to the fund house. His SIP be discontinued. 6. All type of funds
except Liquid funds, cash funds and other funds who invest in very short fixed
return investments offers the facility of SIP. 7. Capital gains, if applicable, are taxed

on a first-in first-out basis. 8. As the investment made through SIP are not at one
time. Some units bought at high price and some at low price, so chances of making
gain through SIP is higher than the one time investment. In short, SIP is a simple
and effective way to create wealth but to create such wealth, one should think
about the investment in SIP for a period of at least for time frame of three years
because it pays to invest in a longer run..
30. SBI and SIP:The relationship between SBI and SIP is quite long and strong. SBI
has introducedseveral SIPs because it is definitely one of the greatest and the
smartest way ofinvestment in the present scenario. Not only is it less risky but at
the same time it alsogenerates less return. Right from Rs 50 to Rs1500, different
amounts can be investedin the SIP monthly scheme of SBI
31. Chapter 3Research Methodology
32. Research Methodology Title of the studySystematic Investment Plan(The
Better Way to Invest In Mutual Funds) Duration of the ProjectThe duration of the
project is 45 days Objective of the study The purpose of choosing the project is to
know: Investors option for entry into mutual fund Lump sum SIP Comparative
analysis between Lump Sum and SIP Investors Delight when investment is through
SIP Procedure for investment in SIP Research TypeConclusive and explorative
approach has been adopted in the study. As here thetopic of research problem has
been explored so that hidden facts can come into thelight and then the maximum
allocation criteria in SIP are Rs. 1000-3000 i.e. the finalconclusion is given 45%
SAMPLE SIZEA sample size of 50 investors was chosen to meet the earlier
mentioned objectives. Theselection of sample was based on the following criteria: People belonging to different state of society.
33. Servicemen working in government organization & private organization.
Professionals who includes doctors, lawyers, teachers etc Research DesignThis
research is Explorative and conclusive in nature because it aims to collect thedata
about the behavior of investors in which way they invest in Mutual Funds.
Theresearch approach used is survey based and the analysis is largely based on
theprimary data. Research InstrumentStructured questionnaire: open- ended and
close- ended. Contact MethodPersonal interview Research ApproachAny
methodology includes the overall research design, the sampling procedure anddata
collection method. The methodology adopted by me for purpose of finding
theinvestment behavior of investors was DIRECT SURVEY METHOD
POPULATIONUdaipur City Study scope of the
34. Udaipur onlyThis project will help existing/prospective investor to understand
what the various modeof investment in Mutual Fund are and why Systematic
Investment Plan gives betterreturns than Lump sum. So that investors can do better
use of their hard earned moneyto earn more profit. Types of data1. Primary Data2.
Secondary DataPrimary Data is that data which is collected by the researcher as per
his/her needsSecondary Data is that data which is collected through references as
websites,journals, books, magazines , etc. LIMITATIONS TO THE SURVEY
35. Though research based decision-making is now considered but still there is a
gapbetween the understanding of researcher and users.Research is there to help in
decision-making, not a substitute of decision-making. Someof the following
limitations have restricts the scope of survey to some extent : Some respondents
gave vague information and were not serious while responding. Some respondents
were hesitant to reveal information about their finances because of income tax
queries. It was difficult to find whether respondents actually participate in their

financial planning. Research can provide number of facts but it does not provide
actionable results. It cannot provide answer to any problem but can only provide a
set of guidelines. Management rely more on the intuitions and judgments rather
than research. Area of research was restricted to some location of the city and
state.
36. Chapter 4Facts and Finding
37. FindingThe analysis is done based on the structured questions and we got
following points: - 55% investor invests in SIP mode. - 84% got more profit in SIP The maximum duration of investment in SIP is 3 years i.e. 34%. - The maximum
allocation criteria in SIP are 1000-3000 i.e. 45%
38. Chapter 5Analysis and Interpretation
39. Q 1: In which Financial Instrument do you invest into?Ans: Financial Instruments
Investment in % Mutual 76 Bond 15 Online Trading 07 Derivatives 02Interpretation:
From above pie chart, I have analyzed that 76% of investors invest inthe analysis is
done on the basis of the response of respondents, which is collectedthrough the
questions present in questionnaire.
40. Q 2: By structure in which type of schemes have you invested?Ans : Types of
schemes on the basis of Investment in % structure Open ended funds 66 Close
ended funds 22 Intervals funds 12Interpretation: The above pie chart depicts that
66% investors invest in Open-endedfunds, 22% in Close-ended funds and 12% in
Interval funds.
41. Q. 3: By investment objective In which type of schemes have you invested?Ans:
Types of Investment on the basis of Investment in % objective Growth Schemes 55
Income Schemes 13 Balances Schemes 32Interpretation: From the above pie chart, I
conclude that there are 55 % investorswho invest in Growth Schemes, 13% investor
invest in Income Schemes, and 32%investors invest in Balanced Funds.
42. Q.4. In which type of fund you want to invest?Ans : TYPES OF FUNDS
INVESTMENT IN % Index Fund 41 Tax Saver Fund 15 Sectoral fund 44Interpretation:
The above chart depicts that the maximum numbers of investor.i.e.41%investors
invest in Sectoral Funds , 44% in Index Funds and 15% in Tax Saver Funds.
43. Q.5 Do you repeat your investment after initial investment?Ans : Repetition of
Investors in % investment Yes 68 No 32Interpretation: The above pie chart depicts
that 68% of investors invest again after theinitial investment
44. Q.6 What percentage of your earnings do you invest in Mutual Funds? Ans : % of
earnings Investors in % Upto 10% 43 Upto 25% 32 Upto 50% 15 Above 50%
10Interpretation: The above chart depicts that 43% investor invest that up to 10%
of theirearning in Mutual Fund.
45. Q.7 :How many investors invested in SIP , Lump sum or both?Ans : Type of
investment Investment in % SIP 55 Lump sum 10 Both 35Interpretation: From above
chart I have analyzed that 55% investors have investedSIP, 10% in lump sum and
35% in both the category.
46. Q.8 what is an allocation criteria of an investor in SIP? Ans : Allocation criteria (in
Rs) Investment in % Less than 1000 9 1000-3000 45 3000-5000 36 More than 5000
10 50 Allocation criteria (in Rs) 45 40 35 30 25 20 investment in % 15 10 5 0 less
than 1000 1000-3000 3000-5000 more than 5000Interpretation: From above chart b
I have analyzed that the allocation criteria ofinvestment is 45% in the range Rs1000
to Rs 3000.
47. Q.9 What is the time duration of investment?Ans : Time duration Investment in
% Less than or equal to 5 years 25 Less than or equal to 4 years 8 Less than or
equal to 3 years 34 Less than or equal to 2 years 25 Less than or equal to 1 year

8Interpretation: The above bar chart depicts that most of the investors (i.e.
33.33%)invest in less than 3 years.
48. Q.10 which has given more profit to investors?Ans : Investment in Profit in %
Lump sum 84 SIP 16Interpretation: The above Pie chart depicts that 84% of
investors have got more profitin Systematic Investment Plan.
49. Chapter 5SWOT Analysis
50. SWOT ANALYSIS STRENGTH WEAKNESS No access to rural market. No direct link
between investors A well known name in and AMC. financial companies. Wide
experience in this field. Dedicated employees. Tie up with many financial
institutions. Ever growing distribution network. Good infrastructure. Experienced
fund manager. Easy access to branch. Opportunities THREATS Positive outlook of
People Highly volatile and uncertain toward mutual funds. market. Untapped
market. Large number of financial giants present in this market
51. Chapter 7Conclusion
52. Conclusion:Findings:Our findings during the training with State Bank of India
(MF), Udaipur was good on thefollowing grounds:- State Bank is a top ranked
company listed with NSDL and CDSL; provide trading through both NSE and BSE. Sis
providing software to their prospective sub brokers and revisers. Cheque updating in
15 minutes and the credit limit up to 10 times.There are some more points :- Mutual
fund advisors give emphasis on mutual funds than other investment options. The
awareness level of investor is low as advisors are interested in dealing in mutual
funds. Very less advisors are knowing about services provided by State Bank of
India (Mutual Fund) Mutual funds have given a new direction to the flow of personal
saving and enable small and medium investors in remote rural and semi urban
areas to reap the benefits of the stock market investments. Indian mutual funds are
thus playing a very important role in allocation of scarce resources in the emerging
economy.
53. Chapter 8Suggestion
54. RECOMMENDATION AND SUGGESTIONSThough the State Bank of India have a
very good ascribed plan with exclusive band ofopportunities but as nothing is free
from the hurdles therefore there are fewshortcomings which I felt makes SBI fail to
achieve its target : There is high potential market for mutual fund advisors in
Udaipur city but this market needs to be explored as investors are still hesitated to
invest their money in mutual fund. In Udaipur investors have inadequate knowledge
about mutual fund, so proper marketing of various schemes is required. Company
should arrange more and more seminars on mutual funds. Awareness of mutual
fund services among the investors are very low so Asset Management Company
needs proper marketing of their all services by advertising , distribution of pamphlet
, arranging seminars etc. Most advisors are not interested in dealing of mutual funds
because they get very low commission. Company should also provide knowledge
about the growth rate and expected growth rate of mutual fund industry in India.
Most people are aware of Life Insurance , NSC and PPF for tax saving so company
should market various tax saving scheme of mutual fund and their benefits.
55. Chapter 9Annexure
56. QUESTIONNAIRE(Hello, I am Chanchal Salvi. I need your spare time to fill up the
questionnaire, as this isthe part of my Summer Internship Training under MBA
curriculum)NAME: ______________________________________ __________________AGE018_____ 18-36_____ 36-54_____ 54-72______ 72 ABOVE______GENDER: Male
FemaleOCCUPATION: Businessman [ ] Pvt. Employee [ ] Govt. Employee [ ]
Professional [ ] Student [ ] other (specify):________CONTACT NO:

__________________________________Q1. In which of these Financial Instruments do you


invest into? Mutual Funds [ ] Bonds [ ] Derivatives [ ] Online trading [ ]Q2 .By
structure in which type of schemes did you invested? Open Ended Fund [ ] Close
Ended Fund [ ] Interval Schemes [ ]Q3.By investment objective in which type of
schemes have you invested? Growth Schemes [ ] Income Schemes [ ] Balanced
Schemes [ ]
57. Q4.In which type of funds you want to invest? Tax Saver Funds [ ] Index Funds [ ]
Sactorial Funds [ ]Q5. Did you repeat your investment after your initial investments?
Yes [ ] No [ ]Q6. What percentage of your earnings do you invest in Mutual Funds?
Up to 10% Up to 25% Up to 50% Above 50%Q7. In which you have invested? SIP [ ]
Lump Sum [ ] Both [ ]Q8. What is your allocation criterion? <1000b [ ] 1000-3000 [ ]
3000-5000 [ ] >5000b [ ]Q9. For what time period you have invested? <= 1 yr. [ ]
<= 2 yr. [ ] <= 3 yr. [ ] <= 4 yr. [ ] <= 5 yr. [ ]Q10. Which has given you more
profit? SIP [ ] Lump Sum [ ]
58. Chapter 10Bibliography
59. Bibliography 1. Internet 2. Magazines and journal of the company 3. Book of
financial Management 4. Website:- www.sbimf.com www.amfi.coms
www.moneycontrol.com www.valueresearch.com www.google.com
www.mutaulfundsindia.com www.investopedia.com