By MBA II Semester Shree Amreli Jilla

8/14/2019 By MBA II Semester Shree Amreli Jilla

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BySheeba LoleMBA II Semester

Shree Amreli Jilla Leuva Patel MBA Collage Of WomenAmreli365 601 GJ

E-mail: [email protected]

ABSTRACT:

This project is about hoe the Investor's Behavior is changing and they are now leavingbehind the sacred investment options like the fixed deposits, company deposits, gold etc.Investors are now looking towards equity linked investment options.

Like most developed and developing countries the mutual fund cult has been catching on inIndia. There are various reasons for this. Mutual Fund makes it easy and less costly forinvestors to satisfy their need for capital growth, income preservation.

And in addition to this a mutual fund brings the benefit of diversification and money

management to the individual investor, providing an opportunity for financial success thatwas once available only to a select few.

In this project I have given a brief about economy, inflation, and equity and debt market.Then it is explained how to cope with the inflation and how mutual fund is one of the bestinvestment options today. A brief about mutual fund industry and the some informationabout HDFC Mutual Fund and its various products are given

INTRODUCTION:

Many individuals find investments to be fascinating because they can participate in thedecision making process and see the results of their choices. Not all investments will beprofitable, as investor wills not always make the correct investment decisions over theperiod of years; however, you should earn a positive return on a diversified portfolio. In

addition, there is a thrill from the major success, along with the agony associated with thestock that dramatically rose after you sold or did not buy. Both the big fish you catch andthe fish that get away can make wonderful stories.

Investing is not a game but a serious subject that can have a major impact on investor'sfuture well being. Virtually everyone makes investments. Even if the individual does notselect specific assets such as stock, investments are still made through participation inpension plan, and employee saving programme or through purchase of life insurance or ahome. Each of this investment has common characteristics such as potential return and therisk you must bear. The future is uncertain, and you must determine how much risk you arewilling to bear since higher return is associated with accepting more risk.

In 1986, Microsoft Corporation first offered its stock to the public. Nine years later, thestock's value had increased over 5,000 percent- a $ 10,000 investment was worth over $

5,00,000 in the same year, worlds of wonder also offered its stocks to the public. Nine yearslater the company was defunct- a $ 10,000 was worth nothing. These are two examples of emerging firms that could do exceedingly well or fail. Would investing in large, well establishfirms generate more consistent returns? The answer depends, of course, on which firmswere invested in. Over the years some investments have generated extraordinary gains,while others have produced only mediocre returns, and still others have resulted insubstantial losses.

The individual should start by specifying investment goals. Once these goals areestablished, the individual should be aware of the mechanics of investing and the
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environment in which investment decisions are made. These include the process by whichsecurities are issued and subsequently bought and sold, the regulations and tax laws thathave been enacted by various levels of government, and the sources of informationconcerning investment that are available to the individual.

An understanding if this financial background leads to three important general financialconcepts that apply to investing.

Toady the field of investment is even more dynamic than it was only a decade ago. Worldevent rapidly-events that alter the values of specific assets the individual has so manyassets to choose from, and the amount of information available to the investors isstaggering and continually growing. Furthermore, inflation has served to increasedawareness of the importance of financial planning and wise investing. In this project I willfirst talk about economy, inflation, equity markets and debt markets to understandinvestments behavior.

INFLATION:

Inflation is a situation where there is ' too much money chasing too few goods'. In suchtimes buyers bid up prices of scarce products/services The scarcity could be caused bysupply issues or a faster than expected rise in demand. Irrespective of what causes

inflation, the impact is the same. The value of the currency you are holding declines.Let's explain this with the help of an example. Suppose the Indian Rupee was freelyexchangeable with only one commodity- crude oil. Let's assume the conversion rate is Re1= 1 barrel of crude (wish it were true!). Now there is tension in the Gulf region resulting inreduced supply. Due to the subsequent rise in price of crude oil in international markets, wewould now have to pay more Rupees for every barrel of oil. Suppose crude prices rise by10%. The new exchange rate will be Rs. 1.1 = 1 barrel of declined from 1 barrel of crudeper Rupee to only 0.91 barrel of crude per Rupee this is the erosion in the value of thecurrency that we are talking about. Also note that while the Indian Rupee may beappreciating vis--vis other currencies, in the ' real sense' there is erosion in value.

Another important fallout one can expect due to rising inflation is higher interest rates. Thecentral banks aim to reduce demand in the economy by rising the cost of money.

When making fresh investments or evaluating your existing holdings in potentiallyinflationary times you need to keep two things in mind:

The possibility of higher interest rates

The erosion in the value of the currency

CONCEPT OF MUTUAL FUND:

A mutual fund is a pool of money, collected from investors, and is invested according tocertain investment objectives.

A mutual fund is created when investors put their money tighter. It is therefore a pool of the investor's funds The most important characteristic of a mutual fund is that thecontributors and the beneficiaries of the fund are the same class of people, namely theinvestors. The term mutual means that investors contribute to the pool, and also benefitfrom the pool. There are no other claimants to the funds. The pool of fund mutually byinvestors is the mutual fund.

A mutual fund's business is to invest the funds thus collected, according to the wishes of theinvestors who created the pool. In many markets these wishes are articulated as"investment mandates". Usually, the investors appoint professional investment managers,to manage their "product", and offer it for investment to the investor. This productrepresents a share in the pool, and pre-states investment objectives. For example, a mutual


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DISADVANTAGES OF MUTUAL FUND,

The following are important disadvantages of investing through mutual fund:

No control over costs: Since investors do not directly monitor the fund's operations theycannot control the costs effectively. Regulators therefore usually limit the expenses of mutual funds.

No tailor- made portfolio: Mutual fund portfolio is created and marketed by AMCs, intowhich investors invest. They cannot create tailor made portfolios.

Managing a portfolio of funds: As the number of mutual funds increase, in order to tailor aportfolio for himself, an investors may be holding a portfolio of funds, with the costs

Of monitoring them and using them, being incurred by him.

NEED FOR INVESTMENT:

Increasing household expense.Creation of wealthIncreasing cost of living.Financial needs according to life stages.Regular incomeCombination of all aboveINVESTMENT OPTION AVAILABLE:

Physical and Financial assets.Equity and DebtGovt. securities and non-govt. securitiesOther optionPublic provident fundRBI Relief Fund.Mutual FundOthers like Indira Vikas Patra, Kisan Vikas Patra CP FD, and Debenture.

FDs FI BONDS Mutual FundAccessibility Low Low Low

Tenor Fixed (medium) Fixed (Long) No lock in period

Tax Benefit None Under section 80C None

Liquidity Low Very Low none

Convince Medium Tedious Very high

Transparency None None Very high

CONCLUSION:

The unique investment strategy of letting the maturity of the debt investment run downwith time and targeting equity investments to capture dividends is targeted to deliverpositive returns over medium time frame. The investment strategy of the fixed incomeportfolio is designed to remove the impact of interest rate movements over the mediumterm. The strategy of targeting dividends in equities over a period is expected to improve


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the yield of the fund. The above investment strategy expects to minimize capital loss inadverse market condition and deliver moderate returns in stable/positive market conditions.

So, if you are looking for an investment product that offers you low risk of capital loss andthe potential to earn reasonable returns in the uncertain environment of today, HDFCMultiple Yield Fund might be the right fund for you.

Sheeba LoleMBA II Semester

Shree Amreli Jilla Leuva Patel MBA Collage Of WomenAmreli365 601 GJ

E-mail: [email protected]

Source : E-mail August 25, 2005

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By MBA II Semester Shree Amreli Jilla