Beruflich Dokumente
Kultur Dokumente
F.M.S. PROJECT
TO, Mr.P.K.SRIVASTAVA
12/19/2013
Table of Contents
ACKNOWLEDGEMENT ................................................................................................................................... 4
MEANING ............................................................................................................................................ 5
A.
B. HERE ARE SOME OF THE ADVANTAGES WHICH MUTUAL FUNDS PROVIDES ITS
INVESTORS VIS--VIS THE DIRECT ROUTE TO EQUITY INVESTMENTS: ................................. 5
I.
Diversification................................................................................................................................... 5
II.
III.
IV.
V.
VI.
Liquidity........................................................................................................................................ 7
VII.
C.
D.
E.
F. COMPARISION OF TOP THREE MUTUAL FUND OF DIFFERENT EQUITY SECTORS VS DIRECT EQUITY
INVESTMENT. ................................................................................................................................................ 9
G.
1)
2)
3)
CONCLUSION:...................................................................................................................................... 17
TABLE OF TABLE
Table 1......................................................................................................................................................... 10
Table 2......................................................................................................................................................... 12
Table 3......................................................................................................................................................... 15
TABLE OF FIGURE
Figure 1 ....................................................................................................................................................... 10
Figure 2 ....................................................................................................................................................... 11
Figure 3 ....................................................................................................................................................... 11
Figure 4 ....................................................................................................................................................... 12
Figure 5 ....................................................................................................................................................... 13
Figure 6 ....................................................................................................................................................... 14
Figure 7 ....................................................................................................................................................... 15
Figure 8 ....................................................................................................................................................... 16
Figure 9 ....................................................................................................................................................... 16
ACKNOWLEDGEMENT
We would like to express our special thanks of
gratitude to my sirMr.P.K.SRIVASTAVAwho gave
us the golden opportunity to do this wonderful
project on the topicMutual Fund Investment Route
Is Safer Way of Investment in Equity Shares than
Direct Investment in Stock Market for Retail Investor.
Elaborate By Studying The Performance Of Top 3
Equity Mutual funds Over The Last 3 Year Period
Vis-A-Vis Performance Of Stock Market Index
During The Same Periodwhich also helped us in
Thanking you.
A. MEANING
Mutual funds are investment vehicles that pool money from many different
investors to increase their buying power and diversify their holdings. This
allows investors to add a substantial number of securities to their portfolio for a
much lower price than purchasing each security individually.
A mutual fund is set up in the form of a trust that has a Sponsor, Trustees, Asset
Management Company (AMC). The trust is established by a sponsor(s) who is like
a promoter of a company and the said Trust is registered with Securities and
Exchange Board of India (SEBI) as a Mutual Fund. The Trustees of the mutual
fund hold its property for the benefit of unit holders. An Asset Management
Company (AMC) approved by SEBI manages the fund by making investments in
various types of securities.
The trustees are vested with the power of superintendence and direction over the
AMC. They monitor the performance and compliance of SEBI regulations by the
mutual fund. The trustees are vested with the general power of superintendence
and direction over AMC. They manage the performance and compliance of SEBI
Regulations by the mutual fund.
Diversification
Investing in stocks directly has one serious drawback - lack of
diversification. By putting all money in just a few stocks, the investor
subjects himself to considerable risk should even one of those stocks
decline.
On the other hand, a mutual fund scheme by investing in several stocks tries
to overcome the risk of investing in just 3-4 stocks. By holding say 20 to 30
stocks, the fund avoids the danger that one rotten apple will spoil the whole
portfolio. Mutual fund schemes own a couple of dozen to more than a
hundred stocks in their portfolio. A diversified portfolio can generally
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hold its downside even if a few stocks fall dramatically. This helps in
containing the overall risks.
II.
Professional Management
No matter how sound an investment sense a stock investor may have, sooner
than later he will realize that active portfolio management requires
considerably more skill, not to mention a lot of time too. There is an ocean
of a difference between part-time stock-picking and full-time fund
management.
Now compare this to mutual fund investing; the mutual fund investor does
not have to track the prospects and potential of companies in the
portfolio. Mutual funds are managed by skilled professionals who
continuously monitor these companies and take decisions on whether to buy,
sell or hold a particular stock in the portfolio.
III.
IV.
Economies Of Scale
By buying a handful of stocks the stock investor loses out on economies of
scale. This tends to pull down the profitability of the portfolio. If the investor
buys/sells actively, the impact on profitability would be that much higher
due to the various charges involved.
Due to frequent purchases/sales, mutual funds incur proportionately lower
trading costs than individuals. Lower costs translate into significantly better
investment performance and returns to the investors.
V.
VI.
Liquidity
A stock investor may not always find the liquidity in a stock to his liking.
There could be days when the stock is hitting the up / down circuit and
buying/selling is curtailed. This does not allow him to enter / exit a stock.
Such liquidity problems are not confronted by a mutual fund
investor.Sometimes a mutual fund may be more liquid than other investment
avenues. For instance, there are days when there are no buyers or sellers for
an individual stock. But an open-ended fund can be bought / sold at that
day's NAV by simply approaching the fund house or its registrar or a
distributor.
VII.
Minimizes Loss
Investing in mutual funds assures more safety of investment than investing
directly in stocks. A company may shut shop or may go bankrupt and
according to the law, the equity shareholders are paid last, after paying all
dues to the creditors of the company.
A mutual fund may lose money, but may not go down as easily as a
company. The legal structure and stringent regulations that bind a mutual
fund safeguard a unit-holder's interests far better. As highlighted above,
investing in mutual funds has some unique benefits that the direct stock
investor would find it difficult to duplicate. By no means are we are stating
that mutual fund investing is a sure-shot way of logging growth. This can be
done even by investing directly in stocks. However, mutual funds offer the
investor a relatively safer and surer way of picking growth minus the hassle
and stress that has become synonymous with stocks over the years.
EQUITIES:
Here are a few things you must consider when you invest in equities:
Figure 1
1 year (%)
12.3
2 year (%)
19.8
3 year (%)
7.3
5 year (%)
20.3
10
Figure 2
Figure 3
Figure 4
1 year (%)
7.1
2 year (%)
20.2
3 year (%)
9.2
5 year (%)
27.8
12
Figure 5
13
Figure 6
14
Figure 7
1 year (%)
2 year (%)
3 year (%)
5 year (%)
7.7
18.8
10.6
24.8
Comparison of return of this MF with some of its holding
15
Figure 8
Figure 9
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G.
CONCLUSION:
Investments may be in direct equities or mutual funds require a lot of time and
energy. Each approach has its own advantages and disadvantages. Direct equity
investing is considered more dynamic by the investor community and thus, those
who can keep a continuous tab on the equity markets prefer the direct equity route
as it gives them much needed zing and excitement. However, the dynamism in the
direct equity investment comes with risk. Hence, only those investors who are able
to understand the nitty-gritty of the equity markets and who are able to devote time
and energy can adopt this route to equity
But not all investors are same in their intelligence and understanding levels. And
even if someone has the ability to understand the direct equity route, he or she
lacks the time to devote to such investment activity and thus prefer taking the
indirect route to equity investments which is mutual funds. Mutual funds provide
the much needed ease while investing in the equity asset class.
As its shown above that how equity mutual funds of different categories
like large cap, mid cap, small cap and diversified have given average return of
almost 23% over 5 years of span and on the other hand some stocks those mutual
fund have given return of less than 10% over five years or even some have given
negative returns also.
So this shows that how risky it could be investing in individual stocks in
comparison to investing through mutual fund.
Though mutual funds havent given much return over 3 years of span but they have
outperformed market over 5 years of span.
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REFERENCES
www.moneycontrol.com
www.rbi.co
www.businesstimes.com
www.economicstimes.com
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