Comparative Analysis On Mutual Fund Scheme MBA Project

This article is a concise form of Comparative Analysis On Mutual Fund Scheme MBA Project. This article can be very useful for the students of MBA and PGDM. They can get an idea from this project to make their own. The following article includes Introduction and Importance of mutual funds. You can download the entire project as well.

INTRODUCTION

A mutual fund is a form of collective investment. It is a pool of money collected from various investors which is invested according to the stated investment objective. The fund manager is the person who invests the money in different types of securities according to the predetermined objectives. The portfolio of a mutual fund is decided taking into consideration this investment objective. Mutual fund investors are like shareholders and they own the fund. The income earned through these investments and the capital appreciation realized by the scheme is shared by its unit holders in proportion to the number of units owned by them. The value of the investments can go up or down, changing the value of the investors holding. Mutual funds are one of the best investments ever created because they are very cost efficient and very easy to invest in.

The investment in securities through mutual funds is spread across wide range of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction at the same time. Various fund houses issue units to the investors in accordance with the quantum of money invested by them. Investors of mutual funds are known as unit holders.

In India a mutual fund is required to be registered with Securities Exchange Board of India [SEBI] which regulates the securities market.

IMPORTANCE OF MUTUAL FUNDS

Small investors face a lot of problems in the share market, limited resources, lack of professional advice, lack of information etc. Mutual funds have come as a much needed help to these investors. It is a special type of institutional device or an investment vehicle through which the investors pool their savings which are to be invested under the guidance of a team of experts in wide variety of portfolios of corporate securities in such a way, so as to minimize risk, while ensuring safety and steady return on investment. It forms an important part of the capital market, providing the benefits of a diversified portfolio and expert fund management to a large number, particularly small investors. Now days, mutual fund is gaining its popularity due to the following reasons.

With the emphasis on increase in domestic savings and improvement in deployment of investment through markets, the need and scope for mutual fund operation has increased tremendously.

The basic purpose of reforms in the financial sector was to enhance the generation of domestic (Tripathy, Mutual Fund in India: A Financial Service in Capital . . . 87) resources by reducing the dependence on outside funds. This calls for a market based institution which can tap the vast potential of domestic savings and chanalise them for profitable investments. Mutual funds are not only best suited for the purpose but also capable of meeting this challenge.

An ordinary investor who applies for share in a public issue of any company is not assured of any firm allotment. But mutual funds who subscribe to the capital issue made by companies get firm allotment of shares. Mutual fund latter sell these shares in the same market and to the Promoters of the company at a much higher price. Hence, mutual fund creates the investors confidence.

 

The phyche of the typical Indian investor has been summed up by Mr. S. A. Dave, Chairman of UTI, in three words; Yield, Liquidity and Security. The mutual funds, being set up in the public sector, have given the impression of being as safe a conduit for investment as bank deposits. Besides, the assured returns promised by them have investors had great appeal for the typical Indian investor.

As mutual funds are managed by professionals, they are considered to have a better knowledge of market behaviors. Besides, they bring a certain competence to their job. They also maximize gains by proper selection and timing of investment.

Another important thing is that the dividends and capital gains are reinvested automatically in mutual funds and hence are not fritted away. The automatic reinvestment feature of a mutual fund is a form of forced saving and can make a big difference in the long run.

The mutual fund operation provides a reasonable protection to investors. Besides, presently all Schemes of mutual funds provide tax relief under Section 80 L of the Income Tax Act and in addition, some schemes provide tax relief under Section 88 of the Income Tax Act lead to the growth of importance of mutual fund in the minds of the investors.

As mutual funds creates awareness among urban and rural middle class people about the benefits of investment in capital market, through profitable and safe avenues, mutual fund could be able to make up a large amount of the surplus funds available with these people.

The mutual funds attracts foreign capital flow in the country and secure profitable investment avenues abroad for domestic savings through the opening of off shore funds in various foreign investors. Lastly another notable thing is that mutual funds are controlled and regulated by S E B I and hence are considered safe. Due to all these benefits the importance of mutual fund has been increasing.

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