RESEARCH METHODOLOGY: A.

TITLE OF THE PROJECT: A COMPARITIVE ANALYSIS OF MUTUAL FUNDS AND ULIPS

STATEMENT OF THE PROBLEM: Investment decisions mainly depend upon the investors perception towards performance of mutual funds and the overall performance of Mutual Fund industry in India. The study choice which compared of the mutual fund with an investors. The project is entitled as A comparative analysis of mutual funds and ULIPS. OBJECTIVES: To study about the mutual funds industry. To study the approach of investors towards mutual funds and ulips. To study the behavior of the investors whether they prefer mutual funds or ulips

SCOPE OF THE STUDY:

Subject matter is related to the investors approach towards mutual funds and ulips. People of age between 20 to 60 Area limited to Chandigarh. Demographics include names, age, qualification, occupation, marital status and annual income.

STEPS OF RESEARCH DESIGN: Define the information needed:- This first step states that what is the information that is actually required. Information in this case we require is that what is the approach of investors while investing their money in mutual funds and ulips e.g. what do they consider while deciding as to invest in which of the two i.e mutual funds or ulips. Also, it studies the extent to which the investors are aware of the various costs that one bears while making any investment. So, the information sought and information generated is only possible after defining the information needed.

Design the research:- A research design is a framework or blueprint for conducting the research project. It details the procedures necessary for obtaining the information

needed to solve research problems. In this project, the research design is explorative in nature. Specify the scaling procedures:- Scaling involves creating a continuum on which measured objects are located. Both nominal and interval scales have been used for this purpose. Construct and pretest a questionnaire:A questionnaire is a formalized set of questions for obtaining information from respondents. Where as pretesting refers to the testing of the questionnaire on a small sample of respondents in order to identify and eliminate potential problems. Population All the clients of State bank of India and State bank of Patiala who are investing money in mutual funds and ulips, both. Sample Unit Investors and non-investors. Sample Size This study involves 50 respondents. Sampling Technique: The sample size has been taken by non-random convenience sampling technique Data Collection: Data has been collected both from primary as well as secondary sources as described below:

Primary sources Primary data was obtained through questionnaires filled by people and through direct communication with respondents in the form of Interview. Secondary sources The secondary sources of data were taken from the various websites , books, journals reports, articles etc. This mainly provided information about the mutual fund and ulips industry in India.

Plan for data analysis : Analysis of data is planned with the help of mean, chi-square technique and analysis of variance. LIMITATIONS: No study is free from limitations. The limitations of this study can be:

Sample size taken is small and may not be sufficient to predict the results with 100% accuracy. The result is based on primary and secondary data that has its own limitations. The study only covers the area of Chandigarh that may not be applicable to other areas.

GENERAL INTRODUCTION: THEORETICAL BACKGROUND THEORETICAL ASPECTS

The SEBI

(Mutual Funds) Regulations 1993 define a mutual fund (MF) as a fund established in the form of a trust by a sponsor to raise monies by the Trustees through the sale of units to the public under one or more schemes for investing in securities in accordance with these regulations.
These regulations have since been replaced by the SEBI (Mutual Funds) Regulations, 1996. The structure indicated by the new regulations is indicated as under. A mutual fund comprises four separate entities, namely sponsor, mutual fund trust, AMC and custodian. The sponsor establishes the mutual fund and gets it registered with SEBI. The mutual fund needs to be constituted in the form of a trust and the instrument of the trust should be in the form of a deed registered under the provisions of the Indian Registration Act, 1908.

The sponsor is required to contribute at least 40% of the minimum net worth (Rs. 10 crore) of the asset management company. The board of trustees manages the MF and the sponsor executes the trust deeds in favor of the trustees. It is the job of the MF trustees to see that schemes floated and managed by the AMC appointed by the trustees are in accordance with the trust deed and SEBI guidelines.

What is a Mutual Fund? A mutual fund is a trust that pools the money of many investors its shareholders to invest in a variety of different securities. Investments may be in stocks, bonds, money market securities or some combination of these. Those securities are professionally managed on behalf of the shareholders, and each investor holds a pro rata share of the portfolio entitled to any profits when the securities are sold, but subject to any losses in value as well. A mutual fund is a group of investors operating through a fund manager to purchase a diverse portfolio of stocks or bonds. There are myriad kinds of mutual funds, each with its own goals and methodologies. Whether or not a mutual fund is a good investment is a matter of much public debate, with many claiming they are excellent for the average person, and others saying they are simply a poor way to invest. For the individual investor, mutual funds provide the benefit of having someone else manage your investments, take care of record keeping for your account, and diversify your rupees over many different securities that may not be available or affordable to you otherwise. Today, minimum investment requirements on many funds are low enough that even the smallest investor can get started in mutual funds.

A mutual fund, by its very nature, is diversified its assets are invested in many different securities. Beyond that, there are many different types of mutual funds with different objectives and levels of growth potential, furthering your chances to diversify. Many critics of mutual funds point out that scarcely over 20% of mutual funds outperform the Standard and Pools 500 Index. This means that nearly 80% of the time, an investor would have been more profitable by simply buying equal shares in all 500 of the companies currently on the S&P 500. Structure of mutual fund industry

The above diagram gives an idea on the structure of an Indian mutual fund. Sponsor: Sponsor is basically a promoter of the fund. For example Bank of Baroda, Punjab National Bank, State Bank of India and Life Insurance Corporation of India (LIC) are the sponsors of UTI Mutual Funds. Housing Development Finance Corporation Limited (HDFC) and Standard Life Investments Limited are the sponsors of HDFC mutual funds. The fund sponsor raises money from public, who become fund shareholders. The pooled money is invested in the securities. Sponsor appoints trustees. Trustees: Two third of the trustees are independent professionals who own the fund and supervises the activities of the AMC. It has the authority to sack AMC employees for nonadherence to the rules of the regulator. It safeguards the interests of the investors. They are legally appointed i.e. approved by SEBI. AMC: Asset Management Company (AMC) is a set of financial professionals who manage the fund. It takes decisions on when and where to invest the money. It doesnt own the money. AMC is only a fee-for-service provider. The above 3 tier structure of Indian mutual funds is very strong and virtually no chance for fraud.

Custodian: A Custodian keeps safe custody of the investments (related documents of securities invested). A custodian should be a registered entity with SEBI. If the promoter holds 50% voting rights in the custodian company it cant be appointed as custodian for the fund. This is to avoid influence of the promoter on the custodian. It may also provide fund accounting services and transfer agent services. JP Morgan Chase is one of the leading custodians. Transfer Agents: Transfer Agent Company interfaces with the customers, issue a funds units, help investors while redeeming units. Provides balance statements and fund performance fact sheets to the investors. CAMS are a leading Transfer Agent in India.

ADVANTAGES OF MUTUAL FUND INVESTMENT Professional Management Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme. Diversification Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. You achieve this diversification through a Mutual Fund with far less money than you can do on your own. Convenient Administration Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient. Return Potential Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities. Low Costs Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors. Liquidity In open-end schemes, the investor gets the money back promptly at net asset value related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund.

 Transparency You get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund managers investment strategy and outlook. Flexibility Through features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience. Affordability Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy. Well Regulated All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SEBI.

DISADVANTAGES OF MUTUAL FUNDS INCLUDE Inability to make ones own decisions No guarantee that the professional managers will provide anticipated results Investment company managers can switch styles of investing, even while adhering to the objectives and policy agreed upon by the mutual fund. This makes it difficult for the investor to keep track of the investments owned by the fund and the activity of fund managers. Past performance, a highly reported indicator is just that, one of many indicators; it is no guarantee for future performance. Careful scrutiny is warranted when reading a funds advertisement

TYPES OF MUTUL FUNDS: Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk tolerance and return expectations etc. thus mutual funds has Variety of flavors, Being a collection of many stocks, an investors can go for picking a mutual fund might be easy. There are over hundreds of mutual funds scheme to choose from. It is easier to think of mutual funds in categories, mentioned below: 1. BASED ON THEIR STRUCTURE OPEN ENDED FUNDS CLOSE-ENDED FUNDS Interval Schemes. 2. BASED ON NATURE Equity Fund Diversified Equity Funds Mid-Cap Funds Sector Specific Funds Tax Savings Funds (ELSS) Debt Fund Gilt Funds: Income Funds: MIPs: Short Term Plans (STPs): Liquid Funds: Balanced Fund

3. BASED ON INVESTMENT OBJECTIVE Growth Schemes Income Schemes Balanced Schemes: Money Market Schemes Tax Saving Schemes Index Schemes Sector Specific Schemes

COMPARISON BETWEEN ULIPS AND MUTUAL FUNDS: Unit Linked Insurance Policies (ULIPs) as an investment avenue are closest to mutual funds in terms of their structure and functioning. As is the cases with mutual funds, investors in ULIPs are allotted units by the insurance company and a net asset value (NAV) is declared for the same on a daily basis. Similarly ULIP investors have the option of investing across various schemes similar to the ones found in the mutual funds domain, i.e. diversified equity funds, balanced funds and debt funds to name a few. Generally speaking, ULIPs can be termed as mutual fund schemes with an insurance component. However it should not be construed that barring the insurance element there is nothing differentiating mutual funds from ULIPs. Points of difference between the two: 1. Mode of investment/ investment amounts Mutual fund investors have the option of either making lump sum investments or investing using the systematic investment plan (SIP) route which entails commitments over longer time horizons. The minimum investment amounts are laid out by the fund house. ULIP investors also have the choice of investing in a lump sum (single premium) or using the conventional route, i.e. making premium payments on an annual, half-yearly, quarterly or monthly basis. In ULIPs, determining the premium paid is often the starting point for the investment activity. This is in stark contrast to conventional insurance plans where the sum assured is the starting point and premiums to be paid are determined thereafter. ULIP investors also have the flexibility to alter the premium amounts during the policy's tenure. For example an individual with access to surplus funds can enhance the contribution thereby ensuring that his surplus funds are gainfully invested; conversely an individual faced with a liquidity crunch has the option of paying a lower amount (the difference being adjusted in the accumulated value of his ULIP). The freedom to modify premium payments at one's convenience clearly gives ULIP investors an edge over their mutual fund counterparts.

2. Expenses In mutual fund investments, expenses charged for various activities like fund management, sales and marketing, administration among others are subject to pre-determined upper limits as prescribed by the Securities and Exchange Board of India. For example equity-oriented funds can charge their investors a maximum of 2.5% per annum on a recurring basis for all their expenses; any expense above the prescribed limit is borne by the fund house and not the investors.

Similarly funds also charge their investors entry and exit loads (in most cases, either is applicable). Entry loads are charged at the timing of making an investment while the exit load is charged at the time of sale. Insurance companies have a free hand in levying expenses on their ULIP products with no upper limits being prescribed by the regulator, i.e. the Insurance Regulatory and Development Authority. This explains the complex and at times 'unwieldy' expense structures on ULIP offerings. The only restraint placed is that insurers are required to notify the regulator of all the expenses that will be charged on their ULIP offerings. Expenses can have far-reaching consequences on investors since higher expenses translate into lower amounts being invested and a smaller corpus being accumulated. ULIPrelated expenses have been dealt with in detail in the article "Understanding ULIP expenses".

3. Portfolio disclosure Mutual fund houses are required to statutorily declare their portfolios on a quarterly basis, albeit most fund houses do so on a monthly basis. Investors get the opportunity to see where their monies are being invested and how they have been managed by studying the portfolio. There is lack of consensus on whether ULIPs are required to disclose their portfolios. During our interactions with leading insurers we came across divergent views on this issue. While one school of thought believes that disclosing portfolios on a quarterly basis is mandatory, the other believes that there is no legal obligation to do so and that insurers are required to disclose their portfolios only on demand. Some insurance companies do declare their portfolios on a monthly/quarterly basis. However the lack of transparency in ULIP investments could be a cause for concern considering that the amount invested in insurance policies is essentially meant to provide for contingencies and for long-term needs like retirement; regular portfolio disclosures on the other hand can enable investors to make timely investment decisions.

4. Flexibility in altering the asset allocation As was stated earlier, offerings in both the mutual funds segment and ULIPs segment are largely comparable. For example plans that invest their entire corpus in equities (diversified equity funds), a 60:40 allotment in equity and debt instruments (balanced funds) and those investing only in debt instruments (debt funds) can be found in both ULIPs and mutual funds. If a mutual fund investor in a diversified equity fund wishes to shift his corpus into a debt from the same fund house, he could have to bear an exit load and/or entry load. On the other hand most insurance companies permit their ULIP inventors to shift investments across various plans/asset classes either at a nominal or no cost (usually, a couple of

switches are allowed free of charge every year and a cost has to be borne for additional switches). Effectively the ULIP investor is given the option to invest across asset classes as per his convenience in a cost-effective manner. This can prove to be very useful for investors, for example in a bull market when the ULIP investor's equity component has appreciated, he can book profits by simply transferring the requisite amount to a debt-oriented plan.

5. Tax benefits ULIP investments qualify for deductions under Section 80C of the Income Tax Act. This holds well, irrespective of the nature of the plan chosen by the investor. On the other hand in the mutual funds domain, only investments in tax-saving funds (also referred to as equity-linked savings schemes) are eligible for Section 80C benefits. Maturity proceeds from ULIPs are tax free. In case of equity-oriented funds (for example diversified equity funds, balanced funds), if the investments are held for a period over 12 months, the gains are tax free; conversely investments sold within a 12-month period attract short-term capital gains tax @ 10%. Similarly, debt-oriented funds attract a long-term capital gains tax @ 10%, while a short-term capital gain is taxed at the investor's marginal tax rate. Despite the seemingly similar structures evidently both mutual funds and ULIPs have their unique set of advantages to offer. As always, it is vital for investors to be aware of the nuances in both offerings and make informed decisions.

Investing in ULIPs?

The high returns (above 20 per cent) are definitely not sustainable over a long term, as they have been generated during the biggest Bull Run in recent stock market history. The free hand given to ULIPs might prove risky if the timing of exit happens to coincide with a bearish market phase, because of the inherently high equity component of these schemes. While a debt-oriented ULIP scheme might be superior to a debt option in a conventional mutual fund due to tax concessions that insurance companies enjoy, such tax incentives may not last.

Look beyond NAVs The appreciation in the net asset value (NAV) of ULIPs barely indicates the actual returns earned on your investment. The various charges on your policy are deducted either directly from premiums before investing in units or collected on a monthly basis by knocking off units.

Either way, the charges do not affect the NAV; but the number of units in your account suffers. You might have access to daily NAVs but your real returns may be substantially lower. A rough calculation shows that if our investments earn a 12 per cent annualized return over a 20-year period in a growth fund, when measured by the change in NAV, the real pre- tax returns might be only 9 per cent. The shorter the term, the lower the real returns.

How charges dent returns An initial allocation charge is deducted from our premiums for selling, marketing and broker commissions. These charges could be as high as 65 per cent of the first year premiums. Premium allocation charges are usually very high (5-65 per cent) in the first couple of years, but taper off later. The high initial charges mainly go towards funding agent commissions, which could be as high as 40 per cent of the initial premium as per IRDA (Insurance Regulatory and Development Authority) regulations. The charges are higher for a linked plan than a non-linked plan, as the former require lot more servicing than the latter, such as regular disclosure of investments, switches, re-direction of premiums, withdrawals, and so on. Insurance companies have the discretion to structure their expenses structure whereas a mutual fund does not have that luxury. The expense ratios in their case cannot exceed 2.5 per cent for an equity plan and 2.25 per cent for a debt plan respectively. The lack of regulation on the expense front works to the detriment of investors in ULIPs.

The front-loading of charges does have an impact on overall returns as we lose out on the compounding benefit. Insurance companies explain that charges get evened out over a long term. Thus we are forced to stay with the plan for a longer tenure to even out the effect of initial charges as the shorter the tenure, the lower our real returns. If we want to withdraw from the plan, you lose out, as you will have to pay withdrawal charges up to a certain number of years. In effect, when we lock in our money in a ULIP, despite the promise of flexibility and liquidity, we are stuck with one fund management style. This is all the more reason to look for an established track record before committing our hard-earned money. Evaluate alternative options As an investor we have to evaluate alternative options that give superior returns before considering ULIPs. Insurance companies argue that comparing ULIPs with mutual funds is like comparing oranges with apples, as the objectives are different for both the products. Most ULIPs give us the choice of a minimum investment cover so that we can direct maximum premiums towards investments.

Thus, both ULIPs and mutual funds target the same customers. If risk cover is your primary objective, pure insurance plans are less expensive. When we choose a mutual fund, we look for an established track record of three to five years of consistent returns across various market cycles to judge a fund's performance. It is early days for insurance companies on this score; investing substantially in linked plans might not be advisable at this juncture.

Try top-ups Insurance companies allow us to make lump-sum investments in excess of the regular premiums. These top-ups are charged at a much lower rate usually one to two per cent. The expenses incurred on a top-up including agent commissions are much lower than regular premiums. Some companies also give a credit on top-ups. For instance, if you pay in Rs 100 as a top up, the actual allocation to units will be Rs 101. If you keep the regular premiums to the minimum and increase your top ups, you can save up on charges, enhancing returns in the long run.

Reduce life cover The price of the life cover attached to a ULIP is higher than a normal term plan. Risk charges are charged on a daily or monthly basis depending on the daily amount at risk. Rates are not locked and are charged on a one-year renewal basis. Our life cover charges would depend on the accumulation in your investment account. As accumulation increases, the amount at risk for the insurance company decreases. However, with increasing age, the cost per Rs 1,000 sum assured increases, effectively increasing your overall insurance costs. A lower life cover could yield better returns.

Stay away from riders Any riders, such as accident rider or critical illness rider, are also charged on a one-year renewal basis. Opting for these riders with a plain insurance cover could provide better value for money. ULIP's as an investment is a very good vehicle for wealth creation ,but way Unit Linked Insurance schemes are sold by insurance company representative's and insurance advisors is not correct.

ULIP's usually have following charges built into it : a) Up-front Charges b) Mortality Charges (Charges for providing the risk cover for life) c) Administrative Charges d) Fund Management Charges

Mutual Fund's have the following charges : a) Up-front charges (Marketing, Advertising, distributors fee etc.) b) Fund Management Charges (expenses for managing your fund)

A few aspects of investing in ULIPs versus mutual funds. Liquidity ULIPs score low on liquidity. According to guidelines of the Insurance Regulatory and Development Authority (IRDA), ULIPs have a minimum term of five years and a minimum looking of three years. You can make partial withdrawals after three years. The surrender value of a ULIP is low in the initial years, since the insurer deducts a large part of your premium as marketing and distribution costs. ULIPs are essentially long-term products that make sense only if your time horizon is 10 to 20 years. Mutual fund investments, on the other hand, can be redeemed at any time, barring ELSS (equity-linked savings schemes). Exit loads, if applicable, are generally for six months to a year in equity funds. So mutual funds score substantially higher on liquidity.

Tax efficiency ULIPs are often pitched as tax-efficient, because your investment is eligible for exemption under Section 80C of the Income Tax Act (subject to a limit of Rs 1 lakh). But investments in ELSS schemes of mutual funds are also eligible for exemption under the same section .Besides the premium, the maturity amount in ULIPs is also tax-free, irrespective of whether the investment was in a balanced or debt plan. So they do have an edge on mutual funds, as debt funds are taxed at 10% without indexation benefits, and 20% with indexation benefits. The point, though, is that if you invest in a debt plan through a ULIP, despite its tax-efficiency your posttax returns will be low, because of high front-end costs. Debt mutual funds dont charge such costs.

Expenses Insurance agents get high commissions for ULIPs, and they get them in the initial years, not staggered over the term. So the insurer recovers most charges from you in the initial years, as it risks a loss if the policy lapses. Typically, insurers levy enormous selling charges, averaging more than 20% of the first years premium, and dropping to 10% and 7.5% in subsequent years. (And this is after investors balked when charges were as high as 65 %) Compare this with mutual funds fees of 2.25% on entry, uniform for all schemes. Different ULIPs have varying charges, often not made clear to investors. For instance, an agent who sells you a ULIP may get 25% of your first years premium, 10% in the second year, 7.5% in the third and fourth year and 5% thereafter. If your annual premium is Rs 10,000 and the agents commission in the first year is 25%, it means only Rs 7,500 of your money is invested in the first year. So even if the NAV of the fund rises, say 20%, that year, your portfolio would be worth only Rs 9,000much lower than the Rs 10,000 you paid. On the other hand, if you invest Rs 10,000 in an equity scheme with a 2.25% entry load, Rs 225 is deducted, and the rest is invested. If the schemes NAV rises 20%, your portfolio is worth Rs 11,730. This shows how ULIPs work out expensive for investors. Deduct the cost of a term policy from the mutual fund returns, and youre still left with a sizeable difference.

COMPARATIVE ANALYSIS OF MUTUAL FUNDS AND ULIPS : What do investors prefer? Do you invest in Mutual Funds ? response Yes No total Frequency 19 31 50 Percentage 62% 38% 100

38% yes no 62%

INTERPRETATION: 62% of the people invest in mutual funds.

If not, then what other option(s) do you prefer to invest? Fixed deposits If others, please specify. post office schemes Recurring deposits

Options Fixed deposits Post office schemes Recurring deposits Total Others: 7

frequency 11 9 4 24

percentages 45.83 37.5 16.66 100

what is the mode of information that you use for insurance companies? a) Advertisement d) Work

Options Advertisements Agents Seminar Workshop total Options Frequency

Frequency 22 12 7 9 50 (observedexpected 9.5 -.5 -5.5 -3.5

percentage 44% 24% 14% 18% 100 (observedexpected) 90.25 .25 30.25 12.25 133 (observedexpected)/e 7.22 .02 2.42 .98 10.64

Advertisements Agents Seminar Workshop Total

22 12 7 9 50

expected frequency= 50/4= 12.5 chi square= observed-expected = 10.64 expected at 3 degree of freedom, df(3)=7.815, thus the calculated value is greater than the table value. Hence, H0 is rejected

18% 44% 14% 24% advertisement agents seminar workshops

Interpretation: It means that all the modes of information are not the same. Advertisement is more popular

In which sector do you prefer to invest your money? Options Government sector Private sector total Frequency 27 23 50 Percentages 54 46 100

frequency

46% 54%

government sector private sector

Options

Frequency

Observedexpected 2

(Observedexpected) 4

(observedexpected)/e 0.16

Government sector Private sector

27

23

-2

0.16

total

50

-2

0.32

chi square= observed-expected = 0.32 expected at df(1), the table value is 3.841 which is greater than the calculated value.

Hence, H0 is accepted. . Interpretation: People prefer both the sectors equally.

At which rate do you want your investment to grow? Options Steadily At an average rate Fast Total frequency 17 13 20 50 percentages 34 26 40 100

frequency

40%

34%

steadily at an average rate fast

26%

interpretation: 40% of the respondents want their investments to grow fastly Which factor do you consider before investing in mutual fund or Ulips (tick) Options frequency percentages

Safety of principal Low risk Higher returns Maturity period Terms and conditions Total

14 15 14 4 3 50
frequency

28 30 28 8 6 100

8%

6% 28%

safety of principal low risk high returns

28% 30%

maturity period terms and conditions

Options

frequenc y 14 15 14 4 3 50

Observedexpected 4 5 4 -6 -7

(Observedexpected) 16 25 16 36 49 142

(observedexpected)/e 1.6 2.5 1.6 3.6 4.9 14.2

Safety of principal Low risk Higher returns Maturity period Terms and conditions total

chi square= observed-expected = 14.2 expected at df(4), the table value is 9.488 which is less than the calculated value. Hence , H0 is rejected

Interpretation: people prefer low risk as the most important factor before investing in mutual funds or ulips.

Imagine that stock market drops immediately after you invest in it then what will you do? Options Withdraw your money Wait and watch Invest more in it frequency 8 26 16

frequency

32%

16% withdraw your money wait and watch invest more in it 52%

Interpretation: 16% of the respondents will wait and watch even if the share market drops.

A. Do you have any other investment/insurance policy? Options Yes No frequency 34 16 Percentages 68 32

Total

50

100

frequency

32% Yes No 68%

Interpretation: 68 % of the people had bought other investment policies.

How often do you monitor your investment? Options Daily Monthly frequency 15 25

Occasionally

10

frequency

20%

30% daily monthly occasionally 50%

Options Daily Monthly Occasionally total

frequency 15 25 10 50

Percentages 30 50 20 100

Interpretation: It shows that most of the people .i.e. 50% prefer monitoring their investment on monthly basis. 20% of the people monitor their investment occasionally. Do you invest your money in share market? Annual Income Total

Below 1,50,000

1,50,0002,50,000

2,50,0004,00,000

Above 4,00,000

Share Market

No

12

24

Yes Total

3 15

4 7

6 9

13 19

26 50

Annual income Below 1,50,000 1,50,0002,50,000 2,50,0004,00,000 Above 4,00,000 total

Frequency(yes) 3 4 6 13 26

Observedexpected -3.5 -2.5 -.5 6.5 0

(Observedexpected) 12.25 6.25 0.25 42.25 61

(observedexpected)/e 1.884 0.961 0.038 6.5 9.383

Expected=26/4= 6.5 chi square= observed-expected = 9.383 expected at df (3), the table value is 7.815 which is less than the calculated value. Hence, H0 is rejected. Interpretation: it states that with the rise in income, the percentage of people investing in share market also increases. What percentage of your income do you invest? Options 0- 5% 5-10% 10-15% total Frequency 26 13 11 50 percentages 52 26 22 100

frequency

22% upto 5% 5-10% 52% 26% 10% % above

Options 0-5 5-10 10-15 total

Frequency 26 13 11 50

Mv 2.5 7.5 12.5

Dx=MV-7.5/5 -1 0 1

FdX -26 0 11 -15

MEAN= 7.5+ -15/20 * 5= 6% INTERPRETATION: people invest around 6% of their income.

How long have you been investing in mutual funds Options 1-5 years 5-10 years 10-15 years total Frequency 22 17 11 50 Percentages 44 34 12 100

frequency

22% 44% 1-5 years 5-10 years 10-15 years 34%

Options 1-5 years

Frequency 9

Observedexpected 2.67

(Observedexpected) 7.1289

(observedexpected)/e 1.126

5-10 years 10-15 years total

7 3 19

0.67 3.33

0.4489 11.0889 18.6667

0.0709 1.751 2.9479

chi square= observed-expected = 2.9479 expected at df(2), the table value is 5.991 which is greater than the calculated value. Hence, H0 is accepted.

Interpretation: This shows that people normally tend to invest for longer term. Theres not much of a difference between the various time periods.

In the past, you have invested mostly in (choose one): Options Savings A/cs & PO schemes Mutual funds investing in bonds Mutual funds investing in stocks Balanced mutual funds Frequency 18 6 3 1 Percentages 36 12 6 2

Individual stocks & bonds Ulips Other instruments like real estate, gold Total

5 4 13 50

10 8 26 100

frequency

Savings A/cs & PO schemes Mutual funds investing in bonds Mutual funds investing in stocks Balanced mutual funds Individual stocks & bonds Ulips

18%

6% 50% 3% 1% 5% 4% 13%

Interpretation: In the past maximum percentage of the respondents i.e 36% of the Other instruments respondents have invested in saving a/cs and pos. like real estate,
gold

You would describe your financial situation as being: A. B. C. D. E. Very unstable. Somewhat unstable. Moderately stable. Stable. Very stable

Options (X) Very unstable(A) Somewhat unstable(B) Moderately stable(C) Stable(D) Very stable(E) total

Frequency ( ) 11 12

X 11 24

x 11 48

9 10 8 50

27 40 40 142

81 160 200 500

Sample mean = Fx = 142 = 2.84 f 50 = 2.675

Standard deviation, = x - x

Standard error = standard deviation = n

2.675 = 0.3783 7.07

Z= Xs - Xp= 2.84-3= 0.4229 S.E 0.3783

SINCE THE CALCULATED VALUE IS LESSER THAN THE TABLE VALUE AT (.05) i.e 1.96, Ho is accepted.

INTERPRETATION: the financial situation is moderately stable.

Your comfort level in making investment decisions can best be described as: options Low Moderate high total frequency 14 18 12 50
frequency

Percentages 32 41 27 100

27%

32% Low Moderate high 41%

INTERPRETATION: 41% of the respondents are moderately comfortable in making investment decisions.

If in the near future if you ever plan to invest in your money in any of the mutual fund company, which would be your choice?

Options Sbi mutual fund HDFC mutual fund Reliance mutual fund ABN AMRO mutual fund Others Total

frequency 7 8 14 11 10 50

percentages 14 16 28 22 20 100

frequency

20%

14% 16%

Sbi mutual fund HDFC mutual fund Reliance mutual fund ABN AMRO mutual fund

22% 28%

others

Options Sbi mutual fund HDFC mutual fund Reliance mutual fund ABN AMRO mutual fund others total

Frequency (O) 7 8 14 11 10 50

(O-E) -3 -2 4 1 0 0

(O-E) 9 4 16 1 0 30

(O-E)/E 0.9 0.4 1.6 0.1 3.0

chi square= observed-expected = 3.0 expected At df(4), the table value is 9.488 which is greater than the calculated value.

Hence, H0 is accepted.

Interpretation: People mostly prefer all the brands equally for their future investments.

DEMOGRAPHICS 58% of people belong to 25-35 age group and on the other hand only 17% of people belong to above 40 age group. 17% of the people are under graduate. 52% of the people are graduates, and 31% of the people are post graduates. 55% of the people are married 45% of the people are unmarried. 31% of the people are having their own business. 31% of the people are salaried. 25% are professionals. 8% are housewives. 5% are retired. 24% of the people belong to below 1,50,000 income group. 36% of the people belong to1,50,000 2,50,000 income group. 33% of the people belong to 2,50,000 4,00,000 income group. Only 7% of the people belong to above 4,00,000 income group.

CONCLUSION A mutual fund is the ideal investment vehicle for todays complex and modern financial scenario. Markets for equity shares, bonds and other fixes income instruments, real estate, derivatives and other assets have become mature and information driven. Today each and every person is fully aware of every kind of investment proposal. Everybody wants to invest money, which entitled of low risk, high returns and easy redemption. In my opinion before investing in mutual funds, one should be fully aware of each and everything.

At the same time Ulips as an investment avenue is good for people who has interest in staying for a longer period of time, that is around 10 years and above. Also in the coming times, Ulips will grow faster. Ulips are actually being publicized more and also the other traditional endowment policies are becoming unattractive because of lower interest rate. It is good for people who were investing in ULIP policies of insurance companies as their investments earn them a better return than the other policies.

FINDINGS

Highest number of investors comes from the salaried class. Highest number of investors comes from the age group of 25-35. Most of the people have been investing their money n the share market belong to Rs.400000 and above income group. Mostly investors prefer monitoring their investment on monthly basis. Most of the people invest upto 6% of their annual income in mutual funds. Most of the people between the age group of 25 35 invest their money in share market.

RECOMMENDATIONS The performance of the mutual fund depends on the previous years Net Asset Value of the fund. All schemes are doing well. But the future is uncertain. So, the AMC (Asset under Management Companies) should take the following steps: 1. The people do not want to take risk. The AMC should launch more diversified funds so that the risk becomes minimum. This will lure more and more people to invest in mutual funds. 2. The expectation of the people from the mutual funds is high. So, the portfolio of the fund should be prepared taking into consideration the expectations of the people. 3. Try tp reduce fund charges, administration charges and other charges which helps to invest more funds in the security market and earn good returns. 4. Diffferent campaigns should be launched to educate people regarding mutual funds. 5. companies should give regular dividends as it depicts profitability. 6. Mutual funds should concentrate on differentiating the portfolio of their MF than their competitors MF 7. Companies should give handsome brokerage to brokers so that they get attracted towards distribution of the funds.

QUESTIONNAIRE

I am Priyanka Manocha pursuing MBA from Gian Jyoti institute of management and technology, Mohali. As a part of the curriculum I am doing

research on COMPARATIVE ANALYSIS OF MUTUAL FUNDS AND ULIPS. Kindly help me in the same by filling the Questionnaire. Your response would be kept strictly confidential and would be used only for academic research.

Do you invest in Mutual Funds or Ulips?

Yes [ ]

No [ ]

If not, then what other option(s) do you prefer to invest? Fixed deposits [ ] Recurring deposits [ ] If others, please specify ___________ post office schemes [ ]

How do you get the information of the various Insurance Companies? Advertisement [ ] Agents [ ] Seminar [ ] Workshops [ ]

In which sector do you prefer to invest your money? a) Private Sector [ ] b) Government Sector [ ]

At which rate do you want your investment to grow? Steadily [ ] At an average rate [ ] Fast [ ]

Which factor do you consider before investing in mutual fund or Ulips? (tick)

Safety of principal [ ] Low risk [ ] High returns [ ] Maturity period [ ] Terms and conditions [ ]

Do you invest your money in share market?

Yes [ ] no [ ]

Imagine that stock market drops immediately after you invest in it then what will you do? Withdraw your money [ ] Wait and watch [ ] Invest more in it [ ]

Do you have any other investment/insurance policy? Yes [ ] No [ ]

How often do you monitor your investment? o o o Daily [ ] Monthly [ ] Occasionally [ ]

What percentage of your income do you invest? 0-5% ( ) 5-10% ( ) 10-15% ( )

How long have you been investing in mutual funds? o o o For the last 1-5 years For the last 5-10 years For the last 10 15 years

In the past, you have invested mostly in (choose one):

Savings A/cs & PO schemes ( ) Mutual funds investing in stocks ( ) Individual stocks & bonds ( )

Mutual funds investing in bonds ( ) Balanced mutual funds ( ) Ulips ( )

Other instruments like real estate, gold ( )

You would describe your financial situation as being:

Very unstable. Moderately stable. Very stable ( )

( ) ( )

Somewhat unstable ( ). Stable. ( )

Your comfort level in making investment decisions can best be described as Low

( )

moderate

( )

high

( )

If in the near future if you ever plan to invest in your money in any of the mutual fund company, which would be your choice? Sbi mutual fund ( ) HDFC mutual fund ( )

Reliance mutual fund ( )

ABN AMRO mutual fund ( )

others ( )

PERSONAL DETAILS Name:

Age Group:

Below 20 Between 20-30 Between 30-40 Above 40 Qualification: Under graduate Post graduate Occupation: Salaried Professional Marital status: Annual income: Below Rs 1,50,000 Rs 2,50,000-Rs 4,00,000 Rs 1,50,000- Rs2,50,000 Above Rs 4,00,000 Business Retired Single Housewife Other: _________ Married Graduate Other:_______________