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INTRODUCTION OF MUTUAL FUND

Different investment avenues are available to investors.


Mutual funds also offer good investment opportunities to the
investors. Like all investments, they also carry certain risks.
The investors should compare the risks and expected yields after
adjustment of tax on various instruments while taking
investment decisions. The investors may seek advice from
experts and consultants including agents and distributors of
mutual funds schemes while making investment decisions.

With an objective to make the investors aware of


functioning of mutual funds, an attempt has been made to
provide information in question-answer format, which may help
the investors in taking investment decisions.

What is mutual fund

A vehicle for investing in stocks and bonds.

A mutual fund is not a alternative investment option to


stocks and bonds, rather it pools the money of several investors
and invests this in stocks, bonds, money market instruments and
other types of securities.

Buying a mutual fund is like buying a small slice of a big


pizza. The owner of a mutual fund unit gets a proportional
share of the fund’s gains, losses, income and expenses. Since
small investors generally do not have adequate time knowledge,
experience and resources for directly accessing the capital
market. They have to rely on an intermediary, which undertakes
informed investment decisions and provides consequential
benefits of professional expertise. The underlying principle of
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mutual funds is their ability to bring down the transaction costs.
The advantage for the investors is the reduction in risk, expert
professional management, diversified portfolios, and liquidity of
investment and tax benefits. By pooling their assets through
mutual funds, investors achieve economies of scale. The
interests of the investors are protected by the SEBI, which acts
as watchdog. Mutual funds are governed by the SEBI (Mutual
Funds) Regulation 1993.

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BASICS OF MUTUAL FUNDS
All mutual funds comprise of four constituents –
Sponsors, Trustees, Asset Management Company and
Custodians.

SPONSORS

The sponsors initiate the idea to set up a mutual fund. It


could be registered company, scheduled bank or financial
institution. A sponsor has to satisfy certain conditions such as
capital, record (atleast five years operation in financial
services), default free dealing and general reputation of fairness.
The sponsor appoints the Trustee, AMC and Custodian. Once
the AMC is formed, the sponsor is just a stakeholder.

TRUST/BOARD OF TRUSTEES

Trustees hold a fiduciary responsibility towards unit holders by


protecting their interests. Trustees float and market schemes, and
secure necessary approvals. They check if the AMC’s investments
are within well-defined limits, whether the fund’s assets are
protected, and also ensure that unit holders get their due returns.
They also review any due diligence by the AMC. For major
decisions concerning the funds, they have to take the unit holder’s
consent. They submit reports every six months to SEBI, investors get
an annual report. Trustees are paid annually out of the fund’s assets –
0.5% of the weekly net asset value.

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CUSTODIAN

Often an independent organization, it takes custody of


securities and other assets of mutual fund. Its responsibilities include
receipt and delivery of securities, collecting income – distributing
dividends, safe keeping of units and segregating assets and
settlements between schemes. Their charges range between 0.15–
0.20% of the net value of the holding. Custodians can service more
than one fund.
The value of all the securities in the portfolio in
calculated daily. From this, all expenses are deducted and the
resultant value divided by the number of units in the fund is the
fund’s NAV.

ASSET MANAGEMENT COMPANY (AMC)

The company that put together a mutual fund is called an


AMC. They are the ones who manage money of the investors.
An AMC takes decisions, compensates investors through
dividends, maintains proper accounting and information for
pricing of units, calculates the NAV and provides information
on listed schemes. It also exercises due diligence on
investments, and submits quarterly reports to the trustees. A
Fund’s AMC can neither act for any other fund nor undertake
any business other than Asset Management. Its Net Worth
should not fall below Rs. 10 crore. And, its fee should not
exceed 1.25% if collection are below Rs. 100 crore and 1% if
collections are above Rs.100 crore. SEBI can pull up An AMC
if it deviates from prescribed role. An AMC may have several
mutual fund schemes with similar or varied investment
objectives.

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Essentials of an AMC’s

The AMC hires a professional money manager, who buys


and sells securities in line with the fund’s stated objective.

All AMCs Regulated by SEBI, Funds governed by Board


of Directors. The Securities and Exchange Board of India
(SEBI) mutual fund regulations required that the fund’s
objectives are clearly spelt out in the prospectus.

In addition, every mutual fund has a board of directors


that is supposed to represent the shareholders’ interests, rather
than the AMC’s. Each mutual fund has a specific stated
objective.

The fund’s objective is laid out in the fund’s prospectus,


which is the legal document that contains information about the
fund, its history, its officers and its performance.

Some popular objectives of a mutual fund are -

Fund Objective: What the fund will invest in


Equity (Growth): Only in stocks
Debt (Income): Only in fixed-income securities
Money Market (including Gilt): In short-term money market
instruments (including government securities).
Balanced: Partly in stocks and partly in fixed-income
securities, in order to maintain a ‘balance’ in returns and risk.

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Expense Ratio

AMC’s charge an annual fee, or expense ratio that covers


administrative expenses, salaries, advertising expenses,
brokerage fee, etc. A 1.5% expense ratio means the AMC
charges Rs. 1.50 for every Rs. 100 in assets under management.

A fund’s expense ratio is typically to the size of the funds


under management and not to the returns earned. Normally, the
costs of running a fund grow slower than the growth in the fund
size – so, the more assets in the fund, the lower should be its
expense ratio.

Load

Some AMC’s have sales charges, or loads, on their funds (entry


load and/or exit load) to compensate for distribution costs.
Funds that can be purchased without a sales charge are called
no-load funds.

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CLASSIFICATION OF FUNDS

SCHEMES ACCORDING TO MATURITY PERIOD:

A mutual fund schemes can be classified into open-ended


schemes or close-ended scheme depending on its maturity
period.

OPEN-ENDED FUND/SCHEME
An open-ended fund or scheme is one that is available for
subscription and repurchase on a continuous basis. These
schemes do not have a fixed maturity period. Investors can
conveniently buy and sell units at Net Asset Value (NAV)
related prices, which are declared on a daily basis. The key
feature of open-end schemes is liquidity.

CLOSE-ENDED FUND/SCHEME

A close-ended fund or scheme has a stipulated maturity


period e.g. 5-7 years. The fund is open for subscription only
during a specified period at the time of launch of the scheme.
Investors can invest in the scheme at the time of the initial
public issue and thereafter they can buy or sell the units of the
scheme on the stock exchanges where the units are listed. In
order to provide an exit route to the investors, some close-ended
funds give an option of selling back the units to the mutual fund
through periodic repurchase at NAV related prices. SEBI
Regulations stipulate that at least one of the two exit routes is
provided to the investor i.e. either repurchase facility or through
listing on stock exchanges. These mutual funds schemes
disclose NAV generally on weekly basis.

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SCHEMES ACCORDING TO INVESTMENT OBJECTIVE:

A scheme can also be classified as growth scheme, income


scheme, or balanced scheme considering its investment
objective. Such schemes may be open-ended or close-ended
schemes as described earlier. Such schemes may be classified
mainly as follows:

GROWTH/EQUITY ORIENTED SCHEME

The aim of growth funds is to provide capital appreciation


over the medium to long-term. Such schemes normally invest a
major part of their corpus in equities. Such funds have
comparatively high risks. These schemes provide different
options to the investors like dividend option, capital
appreciation, etc. and the investors may choose an option
depending on their preferences. The investors must indicate the
option in the application form. The mutual funds also allow the
investors to change the options at a later date Growth schemes
are good for investors having a long-term outlook seeking
appreciation over a period of time.

INCOME / DEBT ORIENTED SCHEME

The aim of income funds is to provide regular and steady


income to investors. Such schemes generally invest in fixed
income securities such as bonds, corporate debentures.
Government securities and money market instruments. Such
funds are less risky compared to equity schemes. These funds
are not affected because of fluctuations in equity markets.
However, opportunities of capital appreciation are also limited
in such funds. The NAVs of such funds are likely to increase in

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the short run and vice versa. However, long term investors may
not bother about these fluctuations.

BALANCED FUND
The aim of balanced funds is to provide both growth and regular
income as such schemes invest both in equities and fixed
income securities in the proportion indicated in their offer
documents. These are appropriate for investors looking for
moderate growth. They generally invest 40-60% in equity and
debt instruments. These fund are also affected because of
fluctuations in share prices in the stock markets. However,
NAVs of such funds are likely to be less volatile compared to
pure equity funds.

MONEY MARKET OR LIQUID FUND

These funds are also income funds and their aim is to


provide easy liquidity, preservation of capital and moderate
income. These schemes invest exclusively in safer short-term
instruments such as treasury bills, certificates of deposit,
commercial paper and inter-bank call money, government
securities, etc. Returns on these schemes fluctuate much less
compared to other funds. These funds are appropriate for
corporate and individual investors as a means to park their
surplus funds for short periods.

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GILT FUND
These funds invest exclusively in government securities.
Government securities have no default risk. NAVs of these
schemes also fluctuate due to change in interest rates and other
economic factors as is the case with income or debt oriented
schemes.

INDEX FUNDS
Index funds replicate the portfolio of a particular index
such as the BSE Sensitive index, S&P NSE 50 index (Nifty),
etc. These schemes invest in the securities in the same weight
age comprising of an index. NAVs of such schemes would rise
or fall in accordance with the rise or fall in the index, though
not exactly by the same percentage due to some factors known
as “tracking error” in technical terms. Necessary disclosures in
this regard are made in the offer document of the mutual fund
scheme.

There are also exchange traded index funds launched by


the mutual funds, which are traded on the stock exchanges.

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IMPORTANT DOCUMENTS

Two key documents that highlight the fund’s strategy and


performance are 1) the prospectus (legal document) and the
shareholder reports (normally quarterly).

BENEFITS IN INVESTING THROUGH MUTUAL


FUNDS
PROFESSIONAL MONEY MANAGEMENT

Fund managers are responsible of implementing a


consistent investment strategy that reflects the goals of the
fund. Fund managers monitor market and economic trends and
analyze securities in order to make informed investment
decisions.

DIVERSIFICATION
Diversification is one of the best ways to reduce risk (to
understand why, read The need to Diversify). Mutual funds
offer investors an opportunity to diversify across assets
depending on their investment needs.

LIQUIDITY

Investors can sell their mutual fund units on any business


day and receive the current market value on their investments
within a short time period (normally three – to five- days).

AFFORDABILITY

The minimum initial investment for a mutual fund is fairly


low for most funds (as low as Rs.500 for some schemes).

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CONVENIENCE
Most private sector funds provide you the convenience of
periodic purchase plans, automatic withdrawal plans and the
automatic reinvestment of interest and dividends.

Mutual funds also provide you with detailed reports and


statements that make record-keeping simple. You can easily
monitor the performance of your mutual funds simply by
reviewing the business pages of most newspapers or by using
our Mutual Funds section in Investor’s Mall.

FLEXIBILITY AND VARIETY

You can pick from conservative, bluechip stock funds,


sectoral funds, funds that aim to provide income with modest
growth or those that take big risks in the search for returns. You
can even buy balanced funds, or those that combine stocks and
bonds in the same fund.

Tax benefits on Investment in Mutual Funds


1) 100% Income Tax exemption on all Mutual Fund
dividends
2) Capital Gains Tax to be lower of –
10% on the capital gains without factoring indication
benefit and 20% on the capital gains after factoring
indication benefit.
3) Open-end funds with equity exposure of more than 50%
are exempt from the payment of dividend tax for a period
of 3 years from 1999-2000.

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ORGANISATION OF A MUTUAL FUND

There are many entities involved and the diagram below


illustrates the organizational set up of a mutual fund:

ORGANISATION OF A MUTUAL FUND


UNIT HOLDERS

SPONSORS

TRUSTEES AMC

MUTUAL FUND TRANSFER


AGENT
CUSTODIAN

SEBI

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The flow chart below describes broadly the working of a
mutual fund:

INVESTORS POOL THEIR


PASSED BACK
MONEY WITH
TO

RETURNS FUND MANAGER

GENERATES INVEST IN
SECURITIES

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MUTUAL FUND STRUCTURE

SEBI

TRUSTEE SPONSOR

OPERATIONS AMC

FUND MANAGER
MKT./SALES MKT./SALES

MUTUAL FUND
DISTRIBUTOR

SCHEMES

INVESTOR

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What are the steps one should keep in mind before investing in a
mutual fund? (How should I invest in a Mutual Fund?)

Investor Risk Profile


Type of Typical Investment
Investment of
Scheme Pattern
Horizon Investments
Money
Objective
Market
Equity Debt
Open Close Inst./
(%) (%)
Others
(%)
Money
Yes No Short-Term Low 0 0-20 80-100
Market
Income-High
Yes No Short-Term Low 0 0-20 80-100
Liquidity
Medium- Low to 80-
Income Yes Yes 0 0-20
Long Term Medium 100
Growth Yes Yes Long Term High 80-100 0-20 0-20
Balanced/
Medium to
Income & Yes Yes Long-Term 0-60 0-40 0-20
High
Growth
Tax-Saving/
80-
ELSS No Yes Long Term High 80-100 0-20
100
Scheme
Sector
Yes Yes Long Term High 80-100 0-20 0-20
Oriented

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PRINCIPAL FINANCIAL GROUP :

AN OVERVIEW

VISION

To be the most preferred Mutual Fund.

MISSION STATEMENT

To offer customer-oriented, innovative products by


leveraging technology to provide superior returns, achieve the
highest service standards and attain sustained growth levels
through principled human resources striving in focused,
transparent ethical manner to exceed investor expectations and
to encourage equal opportunities for minority and women-
owned companies, creating relationships that enhance the
competitive advantage of the Principal Financial Group with
growing businesses.

INTRODUCTION

The Principal Financial Group is a leader in offering


business, individuals and institutional clients a wide range of
financial products and services, including retirements and
investment services, life and health insurance and mortgage
banking through its diverse family of financial services
companies. More employers choose the Principal Financial
Group for their 401 (k) plan than any other bank, mutual fund or
insurance company in the United States. A member of the
fortune 500, the principal financial Group has $134.8 billion in
asset under management and serves some 14.9 million
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customers worldwide from offices in 12 countries throughout
Asia, Australia, Europe, Latin American and the United States.
The principal Financial Group, Incorporated is traded on the
New York Stock Exchange under the ticker symbol PFG.

Working with the right people gets the job done right.

At the Principal Financial Group, they’re always on the


lookout for the right people and the right relationships to best
serve their 1,55,000-plus business customers and more than 11
million consumer customers.

Through their Partner & Alliances network, they offer


clients increased convenience and a multitude of value-added
resources.

COMPANY GOALS
Promote purchasing opportunities and increase the number
of minority and women-owned businesses that are recipients of
purchase orders and contracts from the companies of the
Principal Financial Group. Expand the market opportunities of
the companies of the Principal Financial Group by economically
strengthening minority businesses and forming business
relationships. Ensure prime suppliers have initiated or
expanded their 2 nd Tier Minority purchasing Programs.

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PURPOSE OF PROGRAM

The main purpose of the Supplier Diversity Program is to


promote increased partnerships between minority and women-
owned business enterprises (MWBE) and the Principal Financial
Group. They want to ensure these businesses are given the
maximum opportunity to participate in their procurement
activities.

The Supplier Diversity Program does not provide minority


and women-owned businesses with an unfair advantage. It
provides these businesses an opportunity to compete and
participate on an equal basis with all other suppliers and
contractors who want the chance to do business with the
company. Having a program dedicated to this effort can help
break down some of the barriers that smaller businesses
sometimes run into, which can limit their accessibility. It also
takes a more pro-active approach to doing business with
suppliers whose history has shown to be underutilized.

There is no guarantee that a purchase order or contract


will be issued. All our program policies are based on standard
business practices and all suppliers must be able to meet the
company’s standards for quality, timing, and capacity.

They expect all suppliers doing business with the Principal


Financial Group to meet the same standards:
• One time delivery of quality products and services
• Competitive prices
• Proactive support for their products and services

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A message from Barry Griswell, Chairman and CEO of the
Principal Financial Group:

The Principal Financial Group has a unique ability to provide


employee benefit and business services to growing businesses.
In today’s environment minorities and women own many of
these businesses. Since these same business owners comprise a
large part of our client base, it only makes sense that we do our
best to create opportunities to support minority and women
owned businesses.

The Principal understands that strengthening minority and


women owned businesses contributes to the overall economic
growth in the communities we serve and the expansion of our
markets. Our goal is to have a supplier base that reflects our
customers and our employees.

To achieve this goal, The Principal developed a Supplier


Diversity Program. This program focuses on identifying and
encouraging equal opportunities for qualified minority and
women owned businesses to compete for a share of our
corporate purchases. Our Supplier Diversity Program maintains
a database of minority and women owned companies and
encourages employees throughout the organization to consider
these suppliers when purchasing products or services whenever
possible.

The growth and success the Principal Financial Group has


experienced over the years is dynamic – and diversity has
played a major role. We believe that in developing diversity we

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strengthen the Principal Financial Group and positively impact
the economic health of communities worldwide.

The Principal, is a global leader in helping businesses,


individuals and institutional clients achieve financial security
and success and is committed to broadening its partnership with
minority and women owned firms. These partnerships are
mutually beneficial and contribute to economic progress for
everyone.

FINANCIAL DATA

Total assets under management $134.8 billion


Total GAAP revenues $7.0 billion
Net Incomes $574.2 million
Operating earnings $632.7 million
Operating return on average equity, excluding other
comprehensive income (ROE) 13.1 percent.

ASSOCIATES COMPANIES

Operating Companies of the Principal Financial Group

After scrolling through their list of companies, we found that


they are a family of financial service companies working closely
together to better respond to customer changing needs. More
importantly, they offer an exclusive blend of experience,
stability and financial strength few competitors can match.

U.S. Asset Management & Accumulation


Principal Bank
Principal Global Investors, LLC
Principal Commercial Acceptance, LLC
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Principal Commercial Funding, LLC
Principal Development Investors, LLC
Principal Enterprise Capital, LLC
Principal Financial Advisors, Inc.
Principal Life Insurance Company
Principal Management Corporation
Principal Net Lease Investors, LLC
Principal Real Estate Investors, LLC
Princor Financial Services Corporation
Professional Pensions, Inc.
Spectrum Asset Management, Inc.
Trustar Retirement Services
International Asset Management & Accumulation
AUSTRALIA
Principal Global Investors (Australia) Limited

BRAZIL
BrasilPrev Seguros e Previdencia S.A.

CHILE
Principal Compania de Seguros de Vida Chile, S.A.
Principal Creditors Hipotecarios, S.A.
Principal Tanner Administrator General de Fondos, S.A.

EUROPE
Principal Global Investors (Europe) Limited
HONG KONG
Principal Asset Management Company (Asia) Limited
Principal Insurance Company (Hong Kong) Limited
Principal Trust Company (Asia) Limited
Principal Global Investors (Asia) Limited
INDIA
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Principal Asset Management
Principal Trustee Company Limited
Principal Asset Management Company Pvt. Ltd.

IRELAND
Principal Global Investors (Ireland) Limited
JAPAN
ING-Principal Pensions Company Limited
MEXICO
Principal Mexico Compania de Seguros S.A. de C.V.
Principal Pensiones S.A. de C.V.
Principal Afore S.A. de C.V.
Siefore Principal S.A. de C.V.

SINGAPORE
Principal Global Investors (Singapore) Limited
Life & Health Insurance
Principal Life Insurance Company
Employers Dental Services, Inc.
Executive Benefit Services, Inc.
HealthRisk Resource Group, Inc.
Preferred Product Network

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AWARDS & RECOGNITION
FORTUNE 500
2004
FORTUNE magazine
• Ranked 211th on 2004 FORTUNE 500 list
• Ranked 6th out of 20 Life and Health (stock
companies)
2003
FORTUNE magazine
• Ranked 210th on 2003 FORTUNE 500 list
• Ranked 6th out of 21 Life and Health (Stock companies)
Best Places to Work

2005

FORTUNE magazine
Recognized as one of America’s Most Admired
Companies

FORTUNE magazine
Ranked 61st on 2005 FORTUNE 100 Best Places to Work
AARP
Recognized as one of the Best Companies for older
workers
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2004
FORTUNE magazine
Ranked 95th on 2004 FORTUNE 100 Best Places to Work

Computer world magazine


Ranked 33rd out of 100 Best places to work in IT

National Association of Female Executives


Ranked one of the Top 30 Companies for Executive
Women (3 rd consecutive year)

AARP
Recognized as one of the Best Companies for older
workers
Essence magazine
Recognized among 30 Great Places to Work

INTRODUCING THE FUTURE GOALS - ASSET


ALLOCATION PROGRAM

Principal Mutual Fund brings to you a unique concept of life-


stage investment solutions through its Future Goals - Asset Allocation
Program. Future Goals Series introduces you to the concept of asset
allocation, which determines where you channel your investments to
achieve the desired returns.
The Future Goals - Asset Allocation Program helps you assess
what proportion of shares, bonds and other investments will work
together most efficiently to realize the highest possible return at a
level of risk acceptable to you. And that's not all! The most
interesting aspect of this program is that you can continue to modify
your investments as the times and circumstances change.
Simply put, it is a flexible investment program that takes into
account the highly dynamic nature of life. So while at 30 years of age,
you would be willing to take higher risks and choose equity
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investments that promise you a high return, you would certainly not
want to expose yourself to that level of risk when you are nearing
retirement. At that age you would much rather ease up on your equity
investments and start making more room for fixed instruments, which
assure you of a certain level of returns. The Future Goals-Asset
Allocation Program ensures that you always have an ideal investment
mix at any stage of your life.

What is Asset Allocation?

Asset Allocation provides you inputs to choose a portfolio of


funds designed to match your investment goals. It also allows you to
monitor your investment distribution patterns, check the progress of
your portfolio regularly and assists you to stay on track with your
future financial goals.

Additionally, it gives you the opportunity to invest in a


combination of different asset classes, each of which serves a definite
purpose. This process will help you arrive at a balanced investment
portfolio. Following are the various asset classes that you can invest
in:

• Cash and Cash-equivalents: These are safe, short-term


investments that are highly liquid in nature and thus available
whenever you need liquid cash. Government treasury bills are
included in this asset class.

• Fixed Income Investments: These provide a regular income


with limited risks. Bonds and debentures form part of this asset
class.

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• Equity Investments: These are riskier than the above two asset
classes, since they are more volatile. However, they offer
greater potential for long-term growth, since returns can be
much higher. Shares of a company are classified as equity
investments.

HOW DOES THE FUTURE GOALS - ASSET ALLOCATION


PROGRAM WORK ?

To understand the Future Goals process, follow the three steps


outlined below. Identify the portfolio that matches your risk appetite
and plan your investment accordingly.

Step I - Life Stage Investment Advisor Questionnaire

We at Principal Mutual Fund have designed a Life Stage


Investment Advisor Questionnaire to help you evaluate your
requirements at a particular point in time and gauge your attitude
toward financial risk. This will, in turn, aid us in suggesting the Funds
that best match your objectives and risk tolerance. Thus, the
questionnaire serves as a tool to help you identify your 'investment
nature' better. The Principal Mutual Fund Life Stage Investment
Advisor Questionnaire indicates a break-up of investments,
translating your needs into distinct investment objectives.

Step 2: Fund Selection

Next, select from the following range of Funds of Principal


Mutual Fund will best suit your investment objectives:

• Principal Balanced Fund


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• Principal Cash Management Fund
• Principal Government Securities
• Principal Growth Fund
• Principal Income Fund
• Principal Income Fund Short-term Plan
• Principal Index Fund

Step 3: Rebalancing the portfolio

Over time, your actual portfolio may vary from the initial
portfolio that was suggested to you by the Future Goals program. This
is normal because each fund in your portfolio will achieve different
investment results, while the initial portfolio had fixed percentages.
However, it is important to maintain consistency between your actual
portfolio and the initial one, as it assures that your risk / return mix is
within your comfort zone.

But when your actual portfolio start differentiating from


the initial portfolio, you should consider re-balancing. This entails
reorganizing your holding between the different funds so that
your asset allocation again matches your initial portfolio.

Re-balancing will also help you to align your portfolio to your


investment objectives in a systematic manner. Future Goals offers
you an automatic six-monthly re-balancing option.

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SELLING AND MARKETING OF MUTUAL FUND

Any industry can exist and develop only through strategic


marketing of its product, same is true for the mutual find
industry also. A company’s product performance depends upon
two things: first, its quality, second and most important one its
awareness/popularity among the public. Such awareness and
popularity is possible only through extensive marketing of the
product and is the key to success of that product. Thus,
companies spend a lot on marketing and advertising of the
product. As far as the marketing of mutual fund is concern, it
has to be customer oriented and so, it follows different
strategies for different category of people, which are described
as under:

MARKETING STRATEGIES ADOPTED BY THE


MUTUAL FUNDS

The present marketing strategies of mutual funds can be divided


into three main headings:
• Direct Marketing.
• Selling through intermediaries
• Joint Calls

Direct Marketing

This constitutes 20% of the total sales of mutual funds.


Some of the important tools used in this type of selling are :

Personal Selling: In this case the customer support


officer of the fund at a particular branch takes appointment from
the potential prospect. Once the appointment is fixed, the
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branch officer also called Business Development Associate
(BDA) in some funds then meets the prospect and gives him all
details about the various schemes being offered by his fund.
The conversion rate in this mode of selling is in between 30%-
40%.

Telemarketing: In this case the emphasis is to inform the


people about the fund. The names and phone numbers of the
people are picked at random from telephone directory.
Sometimes people belonging to a particular profession are also
contacted through phone and are then informed about the fund.
Generally the conversion rate in this form of marketing is 15%-
20%.

Direct Mail: This is one of the most common methods


followed by mutual funds. Addresses of people are picked at
random from telephone directory. The Customer Support
Officer (CSO) then mails the literature of the schemes offered
by the fund. The follow up starts after 3-4 days of mailing the
literature. The CSO calls on the people to whom the literature
was mailed. Answers their queries and is generally successful
in taking appointments with those people. It is then the job of
BDA to try his best to convert that prospect into a customer.

Advertisements in newspapers and magazines: The


funds regularly advertise in business newspapers and magazines
besides in leading national dailies. The purpose is to keep
investors aware about the schemes offered by the mutual fund
and their performance in recent past.

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Hoarding and Banners: In this case the hoarding and
banners of the fund are put at important locations of the city
where the movement of the people is very high. Generally such
hoarding are put near UTI offices/ Banks in order to tap people
who are at present investing in UTI schemes. The hoarding and
banner generally contains information either about one
particular scheme of brief information about all schemes of
fund.

Selling through intermediaries

Intermediaries contribute towards 80% of the total sales of


mutual funds. These are the distributors/agents who are in
direct touch with the investors. They perform an important role
in attracting new customers. Most of these intermediaries are
also involved in selling Shares. RBI Bonds, Insurance, Post
Office schemes and other investment instruments. They do a
commendable job in convincing investors to invest in mutual
funds. A lot depends on the after sale services offered by the
intermediary to the customer. Customers prefer to work with
those intermediaries who give them right information about the
fund and keep them abreast with the latest changes taking place
in the market especially if they have any bearing on the fund in
which they have invested.

Regular Meetings with Distributors: Most of the funds


conduct monthly/ BI-monthly meetings with their distributors.
The objective is to hear their complaints regarding service
aspects from funds side and other queries related to the market
situation. Sometimes, special training programs are also
conducted for the new agents/distributors. Training involves
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giving details about the products of the fund, their present
performance in the market, what the competitors are doing and
what they can do to increase the sales of the fund.

Joint Calls

This is generally done when the prospect seems to be a


High Net Worth investor. The BDA and the agent (who is
located close to the HNI’s residence or area of operation)
together visit the prospect and brief him about the fund. The
conversion rate is very high in this situation, generally, around
60%. Both the fund and the agent provide even after sale
services in this particular case.

Meetings With HNI'S: This is a special feature of all the


funds. Whenever a top official visits a particular branch office,
he devotes atleast one to two hours in meeting with the HNI’s of
that particular area. This generally develops a faith between the
HNI’s towards the fund.

32
MARKETING OF FUNDS : CHALLENGES AND
OPPORTUNITIES

When we consider marketing, we have to see the issues in


totality, because we cannot judge an elephant by its trunk or by
its tail but we have to see it in its totality. When we say
marketing of mutual funds, it means, includes and encompasses
the following aspects:

• Assessing of investors needs and market research


• Responding to investors needs
• Product designing
• Studying the macro environment
• Timing of the launch of the project
• Choosing the distribution network
• Finalizing strategies for advertisement and publicity
• Preparing offer document and other literature
• Getting feedback about sales
• Studying performance indicators about fund performance
like NAV
• Sending certificates in time and other after sales services
• Honoring the commitments made for redemption and
repurchase.
• Paying dividends and other entitlements
• Creating positive image about the fund and changing the
nature of the market itself.
The above are the aspects of marketing of mutual fund, in
totality. Even if there is a single weak link among the

33
factors, which are mentioned above no mutual fund can
successfully market its funds.

Widening, Broadening and Deepening The Market

There are certain issues that are directly linked with the
marketing of the mutual funds the first of which is Widening,
Broadening and Deepening of the market for the mutual fund
products. Consider the geographical spread of the investors in
Mutual Fund industry. Almost 80% of the funds are mobilized
from less than 10 centers in the country. Infect there are only
35 centers in the country, which account for 95% of the fund
mobilized. Considering the vast nature of this industry, the first
priority is that the geographical spread has to be widened and
the market has to be deepened. Secondly, he mutual fund
industry must try to spread their wings not only within the
country, but also outside the country.

A. Market in Rural and Semi-Urban Areas

There exists a large investor base in rural and semi urban


areas, having a population of about one lakh, which normally
has access to only post office savings and bank deposits. This
is the single largest untapped market for mutual funds in India.

Rural marketing, unlike the marketing of Mutual Funds in


the metros and urban areas, would require a completely
different strategy, and different means of communication to the
target customers. Typically, investors in the rural and semi
urban areas are not well educated and are inadequately exposed
to the capital market mechanism. Therefore more emphasis has
to be given to the electronic media and other forms of publicity
34
such as wall paintings, hoarding and educational films. It is
also important to utilize the services of local intermediaries like
gram sevaks, postmasters, schoolteachers, agricultural co-
operative societies and rural banks. It would therefore be more
expensive to market mutual funds in such markets than
marketing in the cities.

The Mutual Fund industry can collectively undertake this


job of creating the awareness among the rural population about
the Mutual Funds as a new form of savings, translate that
awareness into increased mobilization of funds. The retail
distribution network, comprising of the district representatives
and collection centers be best utilized to create such awareness
and expand the market. Simplification of literature in local
languages, group meetings in these semi urban and rural areas,
visits by mobile vans with Some audio visual aids and the like,
should help develop these markets. In other words the untapped
markets in the country should ideally be the first thing that the
mutual funds in India should endeavor to tap, not entirely
relying upon the investors in the 35 odd cities of the country.
By concentrating on these areas the investor base will get
broader based. Once the semi urban population gets acquainted
with the concept of mutual funds, it will naturally give the
much-needed stability to the market.
B. Overseas Markets

The second aspect with respect to the widening and


depending the market is expanding the overseas investor base.
A target group with large potential, which can be tapped, is
Non-resident Indians. If offered after sales services of
international standard reasonable return and easy access 35
to
Information, NRI’s are willing to invest in Indian Mutual Funds.
The expansion of the distribution network and quick
dissemination of information, coupled with prompt and timely
service, efficient collection and remittance mechanism, will
play an important role in mobilizing and retaining these funds.
NRI’s will also require continuous presence in their market,
because that generates trust and confidence, which translates
into sustained mobilization of funds.

PRODUCT INNOVATION AND VARIETY


A. Investor Preferences

The challenge for the mutual funds is in the tailoring the


right products that will help mobilizing savings by targeting
investors’ needs. It is necessary that the common investor
understands very clearly and loudly the salient features of
funds, and distinguishes one fund from another. The funds that
are being launched today are more or less look-alike, or plain
vanilla funds, and not necessarily designed to take into account
the investors’ varying needs.

The Indian investor is essentially risk averse and is more


passive than active. He is not interested in frequently changing
his portfolio, but is satisfied with safety and reasonable returns.
Importantly, he understands more by emotions and sentiments
rather than a quantitative comparison of funds’ performance
with respect to an index. Mere growth prospects, in an
uncertain market, are not attractive to him. He prefers one bird
in the hand to two in bush, and is happy if assured a rate of
reasonable return that he will get on his investment. The
expectations of a typical investor, in order of preference are:
36
• The safety of funds
• Reasonable return
• And Liquidity.
B. Product Innovations

With the debt market now getting developed, mutual funds


are tapping the investors who require steady income with safety,
by floating funds that are designed to primarily have debt
instruments in their portfolio. The other area where mutual
funds are concentrating is the money market mutual funds,
sectoral funds, index funds, gift funds besides equity funds.

The industry can also design separate funds to attract


semi-urban and rural investors, keeping their seasonal
requirements in mind.

Birla Dividend Yield Plus and Birla Floating Rate Fund


are a result of customer requirements of dividend income and
hedging mechanism for protection of interest respectively.
These products were designed after extensive market research.

DISTRIBUTION NET WORK


Among the competitors to the mutual fund industry, Life
Insurance Corporation with its dedicated sales force is offering
insurance products, banks with their friendly neighborhood
presence offer the advantage of extensive network, finance
companies with their hefty upfront incentives offer higher
returns, shares (provided the market is moving up) also attract
direct investments from retail investors. It is against this
background that the merits and demerits of the alternative
methods of distribution have to be studied.

37
RETAILING THROUGH AGENTS
The alternative distribution channels that are available are
selling, or using lead managers and brokers along with sub-
brokers, for selling units. If necessary motivation and incentive
is provided to the retailer agents, they are likely to be more
successful than the lead managers. This is because, there is a
sense of loyalty amongst agents, in anticipation of getting
continuous business throughout the year, and the trust and
credibility that has been generated or will be generated by being
loyal to one institution. Statistics reveal that the wastage ratio
of application forms in the leas manager concept is much higher
than in the retail agency system. Saving in advertisements and
publicity expenses is also affected, as the target of
communication is restricted to a few group of individuals, since
the agent will act as a facilitator, informer and educator. The
reduced cost benefits will ultimately accrue to the investor in
the form of higher returns.

In such a system, one achieves brand loyalty through


continuous interaction between agents and investors. Building a
team of agents and other distribution network such as
distribution and collecting agents and franchise offices will
provide the investor the opportunity of having continuous
interaction and contact with the mutual fund. Therefore retail
distribution through agents is a preferred alternative for
distributing mutual fund products.

38
ADVERTISING AND SALES PROMOTION

By their very nature, mutual funds require higher


advertisement and sales promotion expenses than any consumer
product offering measurable performance. Different kinds of
advertising and sales promotion exercises are required to serve
the needs of different classes of investors. For instance, an
aggressive “push” marketing strategy is required for retail
markets, where investors are not adequately aware of the
product and do not have specialized skill in financial market, in
contrast with “pull” marketing strategies for the wholesale
market.

There are certain issue with reference to advertisement,


publicity literature and offer documents, which deserve
attention. Most of the mutual fund advertisements look similar,
focusing on scheme features, returns and incentives. An
investor exposed to the increasing number of mutual fund
products funds that all the available brands are rather identical,
and cannot appreciate any distinction.

The present form of application, brochures and other


literature is generally lengthy, cumbersome and at times
complicated leading to higher emphasis on advertisement. One
of the limiting factors is the regulatory framework governing
advertisements of mutual fund products. For instance, in the
offer documents, mutual funds are required to mention the fund
objectives in clear terms. Immediately thereafter, the first risk
factor that has to be mentioned is that there is no certainty
whether the objectives of the fund will be achieved or not.
Some more relaxation’s in these may facilitate bringing more
novelty in advertisements, within a broad framework, without
39
luring investors through false promises, and will certainly
improve the situation.

Another hurdle is the statutory disclaimer required to be


carried along with every advertisement. Mutual funds have to
provide risk factors.

Under the present mutual fund regulations, a prior


approval by SEBI is a must before a mutual fund can launch its
fund. In the regulation itself, a period of one month has been
provided. But in a month’s time, perhaps the situation may so
change, that the timing of launch gets affected. The requirement
for getting approval, which normally takes about 2 months’
time, defeats the purpose for which the fund was designed also.

QUALITY OF SERVICE

The industry primarily sells quality of services, given that


the performance cannot be promised. It is with this attribute
along with procedural simplicity, that the fund gradually builds
its brands and its class of loyal investors. The quality of
services are broadly categorized as:

• Timely services after the sale of the units, and


• Continuous reporting of the investment performance.

Mutual Fund managers must give the due attention and


evaluate their performance on each front. They may also
consider an option of conducting a service audit for controlling
improving the quality of service
40
MARKET SEGMENTATION

Different segments of the market have different risk-


return criteria, on the basis of which they take investment
decisions. Not only that, in a particular segment also there
could be different sub-segments asking for yet different risk-
return attributes, and differential preference for various
investment attributes of financial product. Different investment
attributes an investor expects in a financial product are:
• Liquidity
• Capital appreciation
• Safety of principal
• Tax treatment
• Dividend or interest income
• Regulatory restrictions
• Time period for investment etc.

One the basis of these attributes the mutual fund market may
be broadly segmented into five main segments as under :

1). RETAIL SEGMENT


This segment characterizes large number of
participants but low individual volumes. It consists of
individuals, Hindu Undivided Families and firms. It may
be further sub-divided into:
i. Salaried class people
ii. Retired people
iii. Businessmen and firms having occasional surpluses
iv. HUFs for long-term investment purpose.

41
These may be further classified on the basis of their
income levels. It has been observed that prospects in different
classes of income levels have different patterns of preferences
of investment. Similarly, the investment preferences for urban
and rural prospects would differ and therefore the strategies for
tapping this segment would differ on the basis of differential
life style, value and ethics, social environment, media habits,
and nature of work. Broadly, this class requires security of the
principal, liquidity, and regular income more than capital
appreciation. It lacks specialized investment skills in financial
markets and highly susceptible to mob behavior.

Marketing Strategy:

The marketing strategy involving indirect selling through


agency network and creating awareness through appropriate media
would be more effective in this segment.

2) INSTITUTIONAL SEGMENT

This segment characterizes less number of participants


and large individual volumes. It consists of banks, public sector
units, financial institutions, foreign institutional investors, and
insurance corporations, provident and pensions funds. This
class normally looks for more specialized professional
investment skills of the fund managers and expects a structured
product than a readymade product. The tax features and
regulatory restrictions are the vital considerations in their
investment decisions. Each class of participants, such as banks,
provides a niche to the fund managers in this segment.

42
Marketing Strategy
It requires more of a personalized and direct marketing to
sustain and increase volumes.

3) TRUSTS
This is a highly regulated, high volume segment. It
consists of various kinds of trusts, namely charitable trusts,
religious trust, educational trust, social trust etc. each with
different objectives. Its basic investment need would be safety
of the principal, regular income and hedge against inflation
rather than liquidity and capital appreciation.

Marketing Strategy
This class offers vast potential to the fund managers, if
the regulators relax guidelines and allow the trust to invest
freely in mutual funds.

4) NRI'S

This segment consists of very risk sensitive participants,


at times referred as “fair weather friends”. They need the
highest cover against political and exchange risk. They usually
prefer easy exit with repatriation of return and principal. They
also hold a strategic importance as they bring in crucial foreign
exchange – a crucial input for developing countries like ours.

Marketing Strategy

Marketing to this segment requires special kinds of


products for group of foreign countries depending upon the
provisions of tax treaties. The ranges of suitable products are
required to design to divert the funds flowing into bank
accounts.
43
5) CORPORATES
Generally, the investment need of this segment is to park
their occasional surplus funds that earns returns more than what
they have to pay on account of holding them. Alternatively they
also get surplus fund due to the seasonality of the business,
which typically become due for the payment within a year or
quarter or even a month. They need short term parking place
for their funds. This segment offers a vast potential to
specialized money market managers. Given the relaxation in
the regulatory guidelines, fund managers are expected to design
the product for this segment.

Thus, each segment and sub segment has there own risk
return preferences forming niches in the market.

Marketing Strategies

Mutual Fund managers have to analysis in detail the intrinsic


needs of the prospects and design a variety of suitable products for
them. Not only those, products are also required to be marketed
through appropriately different marketing strategies.

ROLE OF ADVERTISEMENT IN PROMOTION OF


MUTUAL FUND

Increasing sales have given the mutual fund promoters the


budget to spend more on advertising, which has further boosted sales

Mutual Funds, private sector ones in particular, who had


written off advertising as the “ultimate waste of money” have nearly
tripled their press media spend from Rs. 12.20 crores in the period
January to April 1998 to Rs.31.6 crores in January to April 1999,
according to date supplied by Prudential ICICI AMC (PIAMC) and
sourced from ORGMARG.
44
What’s interesting is that in this period the share of the
private sector mutual funds in the category’s total media
spending has surged from 20 percent to 50 percent. This can be
attributed to private sector funds seeing an increase share of net
inflows relative to the bank-sponsored counterparts in the public
sector.

Clearly advertising types have something to cheer about.


But what has caused this sudden attitudinal shift towards
advertising? According to experts, intermediaries like banks
who are reluctant to sell a product whose name is unfamiliar to
investor are pushing funds into advertising more. Besides, since
more open-ended schemes are now available, some form of
ongoing support to keep sales booming has been deemed
necessary by the funds.

In the words of Mr. Rajiv Vij, vice president marketing,


Templeton Asset Management (India) Pvt. Ltd., “The industry
has discovered that advertising in the changed climate today,
when investors are most receptive to mutual funds, can perk up
sales by anywhere between 20-40% “. MD, Prudential ICICI
AMC Ajay Srinivasan gives his rationale for stepping up
marketing spends; “we believe that the brand is an important
part of the consumer’s decision to invest in a category that is
not yet clearly understood by people.” According to the mutual
fund marketers, advertising helps bring recall when consumers
are looking at investment opportunities. Srinivasan says that
tactical advertising has taised PIAMC’s brand awareness from
5% in June 1993 to 34% now, as per a recent IMRB survey.

45
Advertising backed by an integrated marketing and
communication campaign designed to attract investors with long
term prospective has helped the fund post a redemption-to-sales
ratio of just about 5% as compared to 20-30% for the industry
on an average.

But what mode of advertising do these funds choose?

To sell the category, mass media is more effective because


one needs to target a large segment of the population. Mutual Fund
marketers feel that since the category is ‘information-centric’, press
is the best medium to get across one’s message. Within the print
media, most marketers feel that a combination of leading mainline
and financial newspapers complemented by finance/business
magazines, with relevant thematic appeal and editorial content are
the perfect mix.

Direct mail is another medium, which some funds have


successfully used. But rather than sending out mailers to all and
sundry, there is a need for appropriate targeting.

Educational seminars are the final leg in the marketing and


communication process. In these, investors conditioned by
advertising and hooked by an interesting mailer can have lingering
doubts clarified.

Another very successful media niche, which has been


exploited to the hilt by funds, is intermediary magazines and
newsletters. Besides the low costs of advertising in these
newsletters, these publications circulate to those who are looking for
investment opportunities and thus represent an extremely lucrative
target segment.

46
Advertising content by most of the funds too has undergone a
marked change from concept-selling ads dispelling myths, to selling
specific schemes that meet defined objectives/goals.

RESEARCH METHODOLOGY
Research is common parlance to refer to a search for
knowledge. We can also define research AS S "scientific ad
systematic search for pertinent information on a specific topic".
Research is careful investigation or inquiries for new facts in
any branch of knowledge. Researches are basically systematic
inquiry, with customer's critical examination with objectives to
search new facts or interpret know facts in new light.

R - Rational way of thinking


E - Expert and exhaustive treatment
S - Search for Solution
E - Exactness
A - Analytical a analysis of adequate data
R - Relationship of fact
C - a) Careful recording
b) Critical observation
c) Constructive attitude
d) Condensed & Compactly stated
generalization
H - Honesty and hard work

The various step in the whole process of research


methodologies are as follows:
1. Research Design
2. Research Objectives
3. Sampling Design
4. Data Collection
5. Data analysis & Interpretation
6. Conclusion
7. Report Writing

47
1. RESEARCH DESIGN
Research design is the specification of the method and
procedure of acquiring the information to solve the
problem. It is the overall operational pattern or framework
of the project, which stipulates, what information is to be
collected from which source, by which procedure; how it
is to be processed, analyzed, interpreted and reported.

2. RESEARCH OBJECTIVES
Defining the research objectives basically knows what
actually is to be done. Generally the objectives are:

• To know the existing level of Mutual fund market in


Udaipur City.
• To Study the awareness level of customer about
mutual fund in Udaipur City.
• To assess the marketing strategies adopted by the
Mutual Fund in Udaipur City.

3. SAMPLING TOOLS

Sample is the part of entire universe within which the


research is to be conducted and which give complete
knowledge about the entire population. Sampling design is
consist of three major steps.

48
a. Sample Size
Customers - 70
For the primary objective the researcher has
surveyed 70 those customer who have invested in
Mutual Fund.
b. Sampling Tool
In this project sampling tool used is "Survey" of
respondent through questionnaire filling the
questionnaire is consist of 17 questionnaire filling
the questionnaire is consist of 17 question, well
thought as well as directly related to the topic. The
question of questionnaire is mostly closed ended
along with few open-ended questions.

C. Sampling Method
Researcher has used survey technique. Random
sampling and convenience sampling technique has
been used for data collection.

4. DATA COLLECTION

There are two types of data required for this project –


• Primary Data
• Secondary Data

PRIMARY DATA

The primary data has been collected by survey method


using the questionnaire. The questionnaire is consisting of
17 questions, well thought as well as directly related to
the topic. The question of questionnaire is mostly closed
ended along with few open-ended questions. This is the
49
most economical, efficient & effective way of collecting
primary data. It yields a wide range of information on
various characters like attitude, opinion, motive &
behaviour.

SECONDARY DATA
1. Fact sheets of Mutual Fund Companies
2. Magazines
3. Internet

5. ANALYSIS & INTERPRETATION


The data is finally collected, analyzed and interpreted to
reach to some conclusion.

6. CONCLUSION & SUGGESTION


On the basis of analysis & interpretation of data collected
some of the conclusion is drawn.

7. REPORT WRITING
The terminating step of research methodology is report
writing, which is presentation of whole work done in the
project in written form.

RATIONALE OF THE STUDY


Worldwide, the mutual fund, unit trust as it is called in
same parts of the world, has a long and successful history. The
popularity of the Mutual Fund has increased manifold. In
developed financial markets, like the United States, Mutual
Fund has almost overtaken bank deposits and total assets of
insurance funds. As of date in the US alone there are over 5000
Mutual Fund with total assets of over US$ 3 trillion (Rs. 100
Lakh Crores). 50
In India, the Mutual Fund industry started with the setting
up of Unit Trust of India in 1964, Public sector banks and
financial institutions began to establish Mutual Fund in 1987.
The private sector and foreign institution were allowed to setup
Mutual Fund in 1993. Today there are 36 Mutual Fund and over
200 Schemes with total assets of approximately Rs. 81000
Crores.

LIMITATIONS OF STUDY
a. The research area was restricted only with in Udaipur
City.
b. Limitations of time, means & resources.
c. It is a human tendency or it is a state of mind that
whenever they are being observed or interviewed by
unknown person they behave artificially as they hesitate
to disclosing the facts. This is one of the problems
observed with few of the respondents during the survey.

51
DATA ANALYSIS & INTERPRETATION

Q.1 Age:

No. of
S.No. Age Percentage
Persons
1 15 – 25 15 21.4%
2 25 – 35 48 68.5%
3 35 – 45 30 4.2%
4 above45 04 5.7%

Age of Insured

15 – 25
25 – 35
35 – 45
above45

Interpretation: -
It is interpreted from this information that people in
the age group of 25-35 years are whole interested to avail
the schemes of mutual fund and hence the percentage is
more which reached up to 69%.

52
Q.2 Which profession you belong to:

No. of
S.No. Profession Percentage
Persons
1. Business 12 17.14%
2. Service
(i) Private 22 31.40%
(ii) Government 30 42.80%
3. Students 02 02.8%
4. Housewife 04 05.7%

Profession

Business
Service
(i) Private
(ii) Government
Students
Housewife

Interpretation: -
Hence we can interpret that the people of service
group prefer more to invest in M.F. as compared to others as
the percentage of people taking M.F. in service group is
74% more than the persons from business class. In this
again people who are in govt. job prefer to invest more in
M.F. ie. 42% as compare to people in private sector i.e.
32%.

53
Q.3 In which of the following category your monthly
earning fall:

No. of
S.No. Monthly Earning Percentage
Persons
1. Below 10000 20 28.57%
2. 10000 – 20000 14 20.00%
3. 20000 – 30000 19 27.14%
4. 30000 – 40000 08 11.40%
5. Above 40000 09 12.80%

Monthly Earning

Below 10000
10000 – 20000
20000 – 30000
30000 – 40000
Above 40000

Interpretation: -

From above data it is interpreted that person having


gross income below 10000 have more percentage of
investment in mutual fund as compare to other person to
have more income.

54
Q.4 After you have made an investment, how do you
usually feel?
(a) Very worried
(b) Some what worried
(c) Some what satisfied
(d) Very satisfied

No. of
S.No. Option Percentage
Persons
1. A 18 25.70%
2. B 14 20.00%
3. C 25 35.70%
4. D 13 18.57%

Risk Analysis

A
B
C
D

Interpretation
As per the data availability more than 50% of
customers (Who have chosen a, b or c) remain confused in
order to make an investment decision.

55
Q.5 When you invest your money. What thoughts comes
to your mind first?
(a) I should not loose my money
(b) This should not turn out to be a bad investment.
(c) This should turn out to be a good investment
(d) I know this is good decision.

No. of
S.No. Option Percentage
Persons
1. A 39 55.71%
2. B 11 15.70%
3. C 13 18.57%
4. D 07 10.00%

Perception Analysis

A
B
C
D

Interpretation: -

As per the data availability, more than 50% of sample


population invests their money, keeping eye on the risk
factor rather than return factor.

56
Q.6 If you looked at the portfolio of the investment that
you have already made. how would you
characterize them?
(a) Only assured return investment
(b) Limited investment in risk product
(c) Divided between risky & safe product
(d) Mostly risky product

No. of
S.No. Option Percentage
Persons
1. A 34 48.57%
2. B 19 27.10%
3. C 11 15.70%
4. D 06 08.57%

Investment Trend

A
B
C
D

Interpretation: -

Hence we can interpret the major part of the sample


population concentrate on assured return investment (who
chosen option a or b), which either entirely risk free, or
having less risk element.

57
Q.7 Have you ever invested in mutual fund?
(a) Yes (b) No

No. of
S.no. Option Percentage
Persons
1. A 46 65.71%
2. B 24 34.28%

Awarness Level

A
B

Interpretation: -

As per the research planning 66% customers has been


taken who have invested in mutual funds earlier for
fulfilling primary objectives & another 34% customers who
has not made any investment in mutual funds yet.

58
Q.8 How do you come to know about mutual fund?
(a) Through magazine (b) news papers
(c) T.V. advertisements (d) friends
(e) Brokers (f)Your C.A./Tax advisor/Financial advisor
(g) Direct Sales person of the company.

No. of
S.No. Option Percentage
Persons
1. A 13 18.57%
2. B 07 10.00%
3. C 17 24.28%
4. D 07 10.00%
5. E 11 15.71%
6. F 08 11.42%
7. G 07 10.00%

Media Effectiveness

A
B
C
D
E
F
G

Interpretation: -

As per the data availability, it can be inferred that all


of above media have their influence on the mind of the
investor which emphasizes multiple marketing Strategies
should be adopted for tapping new customer.

Q.9 What do you normally associate with risk?


59
(a) Danger (b) Uncertainty
(c) Opportunity (d) Thrill
(e) Can't say

No. Of
S.no. Option Percentage
persons
1. A 07 10.00%
2. B 26 37.14%
3. C 21 30.00%
4. D 04 05.71%
5. E 12 17.14%

Perception Analysis

A
B
C
D
E

Interpretation: -

As per the data indicates that 38% of sample


population associate risk with uncertainty and 10% were not
able to provide any answer, while 30% take it as an
opportunity which shows that as far as risk is concern
customer get confused.

60
Q.10 Do you know which schemes are offering into the
market by different companies?
(a) Yes (b) No

No. Of
S.No. Option Percentage
persons
1. A 16 22.85%
2. B 54 77.14%

Market Knowledge

A
B

Interpretation: -

As above data indicates that most of the sample


population is not fully aware of the market condition of the
industry & they are more dependent on their respective
advisors.

61
Q.11 If No, would you like to know?
(a) Yes (b) No

No. of
S.no. Option Percentage
Persons
1. A 37 67.00%
2. B 17 33.00%

Interest Level

A
B

Interpretation: -

As per the data shows, 67% of the sample population


who are unaware about the present market condition of the
industry would like to know about the present scenario
which indicates the level of interest of investor.

62
Q.12 In which schemes do you prefer to invest?
(a) Equity (b) Debt
(c) Balance (d) Others

No. Of
S.no. Option Percentage
persons
1. A 18 25.71%
2. B 29 41.42%
3. C 12 17.14%
4. D 12 17.14%

Scheme Preference

A
B
C
D

Interpretation: -

As above data shows that 41% of sample population is


interested in investing in to debt funds while 25% are
interested in equity funds which gives a fair idea to
strategist that what type of product is to be served in the
market.

63
Q. 13 Have you heard abot the ELSS (Equity linked
saving schemes)?
(a) Yes (b) No

No. Of
S.no. Option Percentage
persons
1. A 30 42.85%
2. B 40 57.14%

Tax Saving Schemes

A
B

Interpretation: -

As per the data shows, major part of sample


population 58% are not aware about ELSS and they mostly
invest their money into IDBI & ICICI Tax saving bonds for
Tax saving purpose.

64
Q.14 In which of the following companies you have made
your investment?
(a) Principal mutual fund (b) UTI
(c) Pru. ICICI (d) Standard Charted
(e) Franklin temptation (f) If any other .............

No. of
S.No. Option Percentage
Persons
1. A 14 20.00%
2. B 16 22.85%
3. C 12 17.14%
4. D 07 10.00%
5. E 14 20.00%
6. F 07 10.00%

Market Share

A
B
C
D
E
F

Interpretation: -

As per the above data out of 70 investors, who have


invested in M.F., 14 has made in principal mutual fund,& 16
along with UTI. as far as market share is concern UTI has
acquired top Position.

65
Q.15 How do you feel about the services of the AMC
(Asset Management companies) offered to you.
(a) Fully satisfied (b) Average
(c) Poor

No. of
S.No. Option Percentage
Persons
1. A 17 24.28%
2. B 44 62.85%
3. C 09 12.80%

SatisficationLevel

A
B
C

Interpretation: -

Above data indicates that most of the investor are not


aware about the services offered by the different companies
because of unavailability of any AMC in this area & there
for investor response lie dominantly between option b & a.

66
FINDINGS

Though this project I tried to identify the various


marketing strategies adopted by the different mutual fund
companies for promoting the sales and its effectiveness
(investor's view) As well as I tried to identify potential areas
where process of business development could be undertaken. On
one to one basis in different parts of the state, I had mixed
experiences i.e. somewhere response was very good while
somewhere it was very frustrating.

* As per the data analysis, it can be inferred that all of


above media have their influence on the mind of investor,
which emphasizes multiple marketing strategies, should
be adopted for tapping new customer.

* 67% of the sample population who are unaware about the


present market condition of the industry would like to
know about the present scenario, which indicates the level
of interest of investor.

* Major part of the sample population concentrate on


assured return investment, which either entirely risks free,
or having less risk element.

* 40% of sample population associate risk with uncertain


and 20% were not able to provide any answer, while 15%
take it as an opportunity, which shows that as far as risk is
concern, customers get confused.

67
* 55% of the sample population is not able to take
investment decision independently and they required
further guidance from somebody.

* Most of the investor is not aware about the services


offered by the different companies because of
unavailability of any AMC in this area.

* Major part of sample population (58%) is not aware about


the ELSS (Equity Linked Saving Schemes) and they
mostly invest their money into IDBI and ICICI Tax saving
bonds for tax saving purpose.

* More than 50% of sample population invests their money,


keeping eye on the risk factor rather than return factor.

* Major part of sample population (67%) who have invested


in mutual funds are well aware about the scheme objective
which indicates the objective awareness level of investor.

* Most of the sample population is not fully aware of the


market condition of the industry and they are more
dependent on their respective advisors.

* More than half of the sample population dependents upon


their brokers, chartered accountant and their close friends
in order to make an investment decision.

* Major part of the sample population knows about the


characteristics of mutual funds which shows that 67% of
68
sample population are ready to bear risk as market
perceives because mutual fund returns are subject to
market risk.

* 41% of sample population is interested in investing into


debt funds while 25% are interested in equity funds which
gives a fair idea to strategist that what type of product is
to be served in this market.

* Major part of sample population wants to get an


improvement in product but when the question what kind
of product improvement do you like to have asked, major
part of population were not able to provide any specific
guideline to be adopted however they were intended
towards the better return prospective and emphasis on
minimization of expenses ratio.

69
CONCLUSION

From the analysis of data I can say that the awarness level
regarding mutual funds was very low in Udaipur. Investors lot
of money in UTI, different Co-Operative Banks, and lot other
fraudulent Insurance and Finance companies. The confidence
level of investors in the financial products was very low due to
all the above given reasons.

Investors in this part of the world are very conservative


and they don't prefer taking any risks they like to play safe.
They firstly look for the safety of their capital and are mentally
very rigid.

70
SUGGESTION & RECOMMENDATIONS:

After meeting with different types of persons and


scanning the environment we suggest that following action
should be taken for better results:

• Arrange for presentations in Schools, Colleges,


Corporate offices, and public places.
• Provide training to distributors/agents regularly for
above purpose.
• Arrange for educational seminar regularly.
• Provide healthy incentives/remuneration to
distributors/agents.
• Regular advertisement of schemes of respective
Mutual Fund company in Television, newspaper,
and other business magazines to create awareness.
• Increasing the advertising budget so as to make it
competitive in comparison to other players in the
industry.
• Arrange for Road shows, demonstrations and
presentations regularly. Try to find out the actual
needs of the investors through research/Survey and
offer the products, which suit them.

• Aggressive marketing approach is required in


remote areas.
71
• Try to find out the new markets by extensive
research Generate confidence among the potential
investors.
• Provide prompt services to
investors/distributors/agents.
• Concentrate more on the retail market apart from the
HNI segment.
• Give some prestigious awards to the employees
based on their performance

72
QUESTIONNAIRE

1. Name .........................................................................................

2. Age:
(a) 15 – 25 (b) 25 – 35
(c) 35 – 45 (d) Above 45

3. Which Profession you belong to?


(a) Business (b) Student
(c) Service (d) Housewife
(i) Private (e) Others -----------
(ii) Government

4. In which of the following category your monthly earning fall?


(a) Upto 10000 (b) 10000 – 20000
(c) 20000 – 30000 (d) 30000 – 40000
(e) Above 40000

5. After you have made an investment, how do you usually feel?


(a) Very worried (b) Some what worried
(c) Some what satisfied (d) Very Satisfied

6. When you invest your money, what thoughts come to your


mind first.
(a) I should not loose my money
(b) This should not turn out to be a bad investment.
(c) This should turn out to be a good investment
(d) I know this is good decision.

7. If you looked at the portfolio of the investment that you have


already made, how would you characterize them?

(a) Only assured return investment.


(b) United investment in risk product.
(c) Divided between risky & safe products.
(d) Mostly risky product.

8. Have you ever invested in mutual funds.


(a) Yes (b) No
73
9. How do you come to know about Mutual Fund
(a) Through Magazine.
(b) News Papers
(c) T.V./Advertisements
(d) Friends
(e) Brokers
(f) Your C.A./Tax advisor/Financial advisor
(g) Direct Sales person of the company
(h) Other..................

10. What do you normally associate with risk


(a) Danger (b) Uncertainty
(C) Opportunities (d) Thrill
(e) Cannot Say

11. Do you know which schemes are offering in to the market by


different companies?

(a) Yes (b) No

12. If no, would you like to know.


(a) Yes (b) No

13. In which schemes do you prefer to invest


(a) Equity (b) Debt
(c) Balance (d) Others

14. Have you heard about the ELSS (Equity Linked Saving
Scheme)
(a) Yes (b) No

15. In which of the following companies you have made your


investment.
(a) Principal mutual fund
(b) UTI
(c) PRU. ICICI 74
(d) Standard Charted
(e) Franklin Templeton
(f) If any other (Plz Specify)......................

16. How do you feel about the services of the AMC (Asset
management companies) offered to you.

(a) Fully satisfied


(b) Average
(c) Poor

17. If you need any further improvement either service or product


concern, what kind of features would you like to have in your
product or services are concern.

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75
BIBLIOGRAPHY

 Handbook for writers and editors (by S.S. Rao)


 www.nseindia.com.
 www.amfiindia.com
 www.moneycontrol.com.
 www.sebi.gov.in
 Principles of marketing management (Philip kotlor).
 Marketing management (Philip kotlor, Swew Meng
Leong).
 Strategic marketing.
 www.capitalmarket.com
 www.indiainfoline.com
 Marketing management (Dr. P.K.Shrivastava)
 Business today.
 Business India.
 Business World.

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