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A Project Report
ON “Study
on MUTUAL FUND and Awareness among Insurance Advisor ”
AS PARTIAL FULFILLMENT OF MBA PROGRAM, II YEAR SUBMITTED BY-
Shahbaz Mohsin Siddiqui (MBA13A54)
IAEER‟S PUNE INSTITUTE OF BUSINESS MANAGEMENT
(APPROVED BY AICTE, MINISTRY OF HRD, GOVT. OF INDIA) (AFFILIATED (AFFILIATED TO UNIVERSITY OF PUNE)
PUNE Batch- MBA (2013-2015)
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DECLARATION
I, Shahbaz Mohsin Siddiqui, hereby declare that this project report is the record of authentic work carried out by me during the period from 14 th May 2014 to 14 th July 2014 and has not been submitted earlier to any university or institute for the award of any degree/diploma etc.
Name of the Student: Student: Shahbaz Shahbaz Mohsin Mohsin Siddiqui Siddiqui Date: .................... ................................ .............. ..
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CERTIFICATION This is to certify that Mr. Shahbaz Mohsin Siddiqui has completed SIP under my guidance. Date of Submission: ...........................
Signature: ...................... ............................. ....... (Mrs. Neelima Khaladkar)
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ACKNOWLEDGEMENT ACKNOWLEDG EMENT This project has been an honest and dedicated attempt to make the analysis on marketing material as authentic as it could. And I earnestly hope that it provides useful and workable information and knowledge to any person regarding it. During this period, I had the pleasure of working closely with accomplished organization people who shared with me their experience and helped me in completion of my research. I express my sincere thanks to my project guides and my institute faculty for guiding me. Lastly I am grateful to my parents who have been my mentors and motivators. I am thankful to all my batch mates who have been directly or indirectly involved in successful completion of this project.
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PREFACE
The summer training of a management studies play an important role in developing his as well groomed professional. It allows a student to give theoretical concepts a practical in the field of application. If gives the candidate an idea of dynamic & versatile professional world as well as exposure to intricacies & complexities of corporate world. Doing the summer training at NJ INDIA INVEST was great experience. An opening experience to the concepts of marketing department helped me in understanding the concepts that are applied by the organization since it`s inception has progressed a lot & is walking guideline of success, As the organization is marching with the speeds towards the horizon. This division is holding with a greater speed to keep the pace with the major pla play yers ers in the market. ket. During the MBA course we are taught dozen of subjects which if not applied properly are a simple waste of time. Implementing & in learning of concept of marketing in the market pr provider an opportun tunity ity to pra practica ticallly. I got a chan hance to app apply our the theory & accep ccepta tanc ncee myself with the functioning of marketing in a period of 8 weeks exposure to the corporate environment. I got a learning of basics of marketing etc. Real learning places it`s worth only when it gives sweet fruits in future. Summer training is one way to learning at work. I enjoyed the interesting experience & every part of it.
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EXECUTIVE SUMMARY The project titled ³A study of mutual fund and awareness among insurance advisors´ being carried out for NJ INDIA INVESTS PVT. LTD. Today an investor is interested in tracking the value of his investments, whether he invests directly in the market or indirectly through Mutual Funds. This dynamic change has taken place because of a number of reasons. With globalization and the growing competition in the investments opportunity available he would have to make guided and rational decisions on whether he gets an acceptable return on his investments in the funds selected by him, or if he needs to switch to another fund. In order to achieve such an end the investor has to understand the basis of appropriate preference measurement for the fund, and acquire the bas basic ic knowled ledge of the the differen erentt measures of evaluating the the performance performance of the fund. Only then would he be in a position to judge correctly whether his fund is per perfforming well or no nott, and and make ake the righ ight deci ecision ion. Th Thiis project is underta ertake ken n to help the investors in tracking the performance of their investments in Mutual Funds and has been carried out with the objective of giving performance analysis of Mutual Fund. The methodology for carrying out the project was very simple that is through secondary data obtained through various mediums like fact sheet of the funds, the Internet, Business magazines, Newspaper, etc. the analysis of Mutual Funds has been done with respect to its various parameters. I hope NJ INDIA INVEST PVT. LTD., Pune will recognize this as well as take more references from this project report.
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Contents ACKNOWLEDGEMENT............................................................................................................................. ............................................................................................................................. 4 ........................................................................................................................ 6 EXECUTIVE SUMMARY ......................................................................................................................... INDUSTRY OVERVIEW:- ........................................................................................................................... ........................................................................................................................... 8 MUTUAL FUND:- ..................................................................... ................................................................................................................................. ............................................................ 8 ....................................................................................................................................... 9 Characteristics:. ....................................................................................................................................... HISTORY OF INDIAN MUTUAL FUND INDUSTRY ................................................................................... 10 .............................................................................................................. 13 MUTUAL FUND STRUCTURE ............................................................................................................... ........................................................................................................................................ ...................................................................... 13 SPONSOR:- .................................................................. ...................................................................................................................... ........................................................... 14 BOARD OF TRUSTEE:- ........................................................... IMPORTANT CHARACTERISTICS OF A MUTUAL FUND ............................................................ .......................................................................... .............. 16 Types Of Mutual Fund................................................................. ........................................................................................................................... .......................................................... 18 Advantages Of Mutual Fund: ................................................................................................................ ................................................................................................................ 23 Disadvantages Of Mutual Fund:............................................................ ............................................................................................................ ................................................ 31 Risk V/S Return:- ................................................................................................................................... ................................................................................................................................... 32 Mutual Fund Investing Strategies: Str ategies: .......................................................................................... ........................................................................................................ .............. 36 Factors Affecting A ffecting Mutual Fund ............................................................................................................. 37 Major Mutual Fund Companies In India ............................................................................................... 42 Company Profile ........................................................................................................... .................................................................................................................................... ......................... 46 Vision & Mission............................................... Mission.................................................................................................................. ................................................................................. .............. 48 WHY INSURANCE AGENTS SHOULD SELL MUTUAL FUND? .................................................................. 60 Research Methodology ......................................................................................................................... ......................................................................................................................... 64 OBJECTIVE OF STUDY:- ........................................................................... .......................................................................................................................... ............................................... 64 Questionnaire ................................................................. ....................................................................................................................................... ...................................................................... 67 Summary Of Findings ......................................................................................................................... ............................................................................................................................ ... 69 CONCLUSION..................................................................................................... ......................................................................................................................................... .................................... 76 SUGGSETIONS ................................................................. ....................................................................................................................................... ...................................................................... 78 Bibliography .................................................................... .......................................................................................................................................... ...................................................................... 79
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INDUSTRY OVERVIEW:MUTUAL FUND:INTRODUCTION:-
A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in pr proportion to the number of units owned ned by the them. Thus a Mutual Fund is the most suitable able investment for the common man as it offers an opportunity to invest in a diversified, pr profess essionally lly manage naged d bask asket of secu ecurities ies at a relat elatiively vely low low cos cost The flow chart below describes broadly the working of a Mutual Fund.
A Mutual Fund is a body corporate registered with the Securities and Exchange Board of India (SEBI) that pools up the money from individual/corporate investors and invests the same on behalf of the investors/unit holders, in Equity shares, Government securities,
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Bonds, Call Money Markets etc, and distributes the profits. In the other words, a Mutual Fund allows investors to indirectly take a position in a basket of assets. Mutual Fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Investments in securities are spread among a wide cross-section of industries and sectors thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at same time. Investors of mutual funds are known as unit holders. The investors in proportion to their investments share the profits or losses. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. A Mutual Fund is required to be registered with Securities Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public.
Characteristics:
A mutual fund actually belongs to the investors who have pooled their funds.
A mutual fund is managed by investment professionals and other service providers, who earn a fee for their services, from the fund.
The pool of funds is invested in a portfolio of marketable investments. The value of the portfolio is updated every day.
The investors share in the fund is denominated by µunits. The value of the units changes with change in the portfolio value, every day. The value of one unit of investment is called the Net Asset Value or NAV.
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HISTORY OF INDIAN MUTUAL FUND INDUSTRY The mutual fund industry in India started 1963 with the formation of unit trust of india,at the initiative of Government of India and Reserve Bank. Through the growth was slow, but it accelerated from the year 1987 when non-UTI players entered in the Industry. In the past decades, Indian mutual fund industry had seen a dramatic improvement, both qualities wise as well as quality wise. Before the monopoly of the market had seen an ending phase: the Assets Under Management was Rs67 billion. The private sector entry to the fund family raised the AUM to Rs 470 billion in march 1993 and till April 2004:it reached the height if Rs. 1540 billion. The mutual fund industry is obviously growing at a tremendous space with the mutual fund industry can be broadly put in to four phases according to the development of the sector. Each phase is briefly described as under. The History of Mutual Fund can be divided in to Four parts First Phase - 1964-1987:
Unit Trust of India (UTI) was established in 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was delinked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs. 6,700 crores of assets under management.
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Second Phase - 1987-1993 (Entry of Public Sector Funds):
1987 marked the entry of non-UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non-UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs. 47,004 crores.
Third Phase - 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996.
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The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs. 44,541 crores of assets under management was way ahead of other mutual funds. Fourth Phase - since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs. 29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs. 76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth.
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MUTUAL FUND STRUCTURE
The Structure Consists: The structure of mutual fund in India is governed by SEBI Regulation 1996. These regulation make it mandatory for mutual mutual fund to have 3-tier structure of sponsers ,Trustee, AMC (assest management company).
SPONSOR:A sponsor is body corporate who establishes a mutual fund. It may be one person acting alone or together with other body corporate . Sponsor must contribute atleast 40% of the net worth of the investment Managed and meet the elegibility criteria prescribed under the SEBI ( Mutual Fund) Regulations 1996.
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BOARD OF TRUSTEE:Mutual fund requires to have an independent board of Trustee, where two third of the trustees should be independent person who are not associated with the sponsor in any manner. The board of trustees of the trustee company holds the property of the mutual fund in trust for the benefit of the unit holders. The board of trustees is responsible for protecting the unit holders interest.
Asset Management Company (AMC):The role of asset Management Company is highly significant in the mutual fund operation. The AMC is appointed by the Trustee. They are the fund managers i.e. they invest the investors money in various securities ( equity, debt and money market instruments) after proper research of market conditions and the financial performance of individual companies and specific securities in the efforts to meet or beat average market return and analysis. The AMC is required to be approved by the Securities and Exchange Board of India (SEBI) to act as an asset management company of the Mutual Fund. At least 50% of the directors of the AMC are independent directors who are not associated with the Sponsor in any manner. The AMC must have a net worth of at least 10 crore at all times. They also look after the administrative functions of a mutual fund for which they charge management fee.
Registrar and Transfer Agent:The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent to the Mutual Fund. The Registrar processes the application form, redemption requests and dispatches account statements to the unit holders
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Custodian:Mutual fund is required by law to protect their portfolio securities by s placing them with a custodian. Nearly all mutual funds use qualified bank custodians. Only a registered custodian under the SEBI regulation can act as a custodian to a mutual fund. A custodian handles the investment back office of a mutual fund.
RESPONSIBILITY OF CUSTODIANS:
Receipt and delivery of securities
Holding of securities.
Collecting income
Holding and processing cost
Corporate actions etc
Fee structure:Custodian charges range between 0.15% to 0.20% on the net value value of the customers holding for custodian services space is one important factor which has fixed cost element.
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IMPORTANT CHARACTERISTICS CHARACTERISTICS OF A MUTUAL FUND
A Mutual Fund actually belongs to the investors who have pooled their Funds. The ownership of the mutual fund is in the hands of the Investors.
A Mutual Fund is managed by investment professional and other Service providers, providers, who earns earns a fee for their services, services, from the funds.
The pool of Funds is invested in a portfolio of marketable investments.
The value of the portfolio is updated every day.
The investors share in the fund is denominated by ³units´. The value of the units changes with change in the portfolio portfolio value, every day. The value of one unit of investment is called net asset value (NAV).
The investment portfolio of the mutual fund is created according to The stated Investment objectives of the Fund.
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RATE OF RETURN ON MUTUAL FUNDS:An investor in mutual fund earns return from two sources: Income from dividend paid by the mutual fund. Capital gains arising out of selling the units at a price higher than the acquisition price
Formation and regulations: Mutual funds are to be established in the form of trusts under the Indian trusts act and are to be be operated by separate asset mana anagemen ementt compan panies (AMC s) AMCs shall have a minimum Net worth of Rs. 5 crores; AMCs and Trustees of Mutual Funds are to be two separate legal entities and that an AMC or its affiliate cannot act as a manager in any other fund; Mutual funds dealing exclusively with money market instruments are to be regulated by the Reserve Bank Of India Mutual fund dealing primarily in the capital market and also partly money market instruments are to be regulated by the Securities Exchange Board Of India (SEBI) All schemes floated by Mutual funds are to be registered with SEBI.
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Types Of Mutual Fund
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Open-Ended - This scheme allows investors to buy or sell units at any point in
time. This does not have a fixed maturity date. 1. Debt/ Income - In a debt/income scheme, a major part of the investable
fund are channelized towards debentures, government securities, and other debt instruments. Although capital appreciation is low (compared to the equity mutual funds), this is a relatively low risk-low return investment avenue which is ideal for investors seeing a steady income. 2. Money Market/ Liquid - This is ideal for investors looking to utilize
their surplus funds in short term instruments while awaiting better options. These schemes invest in short-term debt instruments and seek to provide reasonable reasonable returns returns for the investors. investors. 3. Equity/ Growth - Equities are a popular mutual fund category amongst
retail investors. Although it could be a high-risk investment in the short term, investors can expect capital appreciation in the long run. If you are at your prime earning stage and looking for long-term benefits, growth schemes could be an ideal investment.
Closed-Ended - In India, this type of scheme has a stipulated maturity
period and investor investorss can invest only during the initial launch period known as the NFO (New Fund Offer) period.
1.Capital Protection - The primary objective of this scheme is to safeguard the principal amount while trying to deliver reasonable returns. These invest in high-quality fixed income securities with marginal exposure to equities and mature along with the maturity period of the scheme.
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2.Fixed Maturity Plans (FMPs ) - FMPs, as the name suggests, sugge sts, are ar e mutual fund schemes with a defined maturity period. These schemes normally comprise of debt instruments which mature in line with the maturity of the scheme, thereby earning through the interest component (also called coupons) of the securities in the portfolio. FMPs are normally passively managed, i.e. there is no active trading of debt instrum instruments ents in the portfolio. The expenses which are charged to the scheme, are hence, generally lower than actively managed schemes.
HYBRID FUND:
In the hybrid category, balanced funds tend to stick to a relatively fixed allocation of stocks and bonds. Actively managed asset allocation funds tend to have portfolios with a mix of stocks and bonds that responds to market conditions as perceived by the fund manager. Passively managed asset allocation, life-cycle and target-date funds generally have a stock bond mix that changes over a lifetime, moving progressively progressively from aggressive to more conservative structures.
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Mutual Fund Equity schemes have delivered very attractive returns in last 5 years, giving over 51% returns annually:-
Scheme Name
3 Years
5 Years
7 Years
10 Years
20.98
35.10 35.10
31.92
27.79
BSE 30 (SENSEX)
23.7
29.19
23.4
12.69
NSE 50
23.08
27.78
22.11
12.9
46
30
20
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Average of Diversified Mutual Fund scheme
NO.
Of
diversified
scheme considered
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Comparison of Investment Products:-
Equity
Return
Safety
Volatility Liquidity Convenience Convenience
High
Low
High
High
Corporate Moderate Moderate Moderate Low Debentures Corporate Moderate Low Low Low FDs Bank Low High Low High Deposits
Moderate Low Moderate High
PPF
Moderate High
Low
Moderate High
Life Insurance
Low
Low
Low
Gold
Moderate High
High
Moderate Moderate Gold
Real Estate High
Moderate High
Mutual Fund
High
High
Moderate
Low
Low
Moderate High
High
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Advantages Of Mutual Mutual Fund:
Advantage #1: Mutual funds can reduce the anxiety of investing.
Most investors constantly live with a certain amount of anxiety and fear about their investments because they feel they lack one or more of the following essentials: (1) market knowledge, (2) investing experience, (3) self-discipl self-discipline, ine, (4) a proven game plan, or (5) time. As a result, they often invest on impulse or emotion. Because of their inherent design that taps professional expertise and spreads risk, mutual funds can go a long way toward relieving the anxiety associated with investing.
Advantage #2: Mutual fund shares can be purchased in such small amounts, so it's easy to get started.
If you have been putting off starting your investing program because you don't know which stocks to invest in (and you can't afford your own personal investment consultant!), mutual funds will get you on your way. Investing in a mutual fund usually doesn‘t require a large sum of money. Most fund
organizations do have minimum amounts needed to open an account (usually $1,000 to $3,000), but minimums are often dramatically lower for IRAs and for "automatic deposit accounts" (where you agree to make regular monthly deposits to build your account).
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Advantage #3: Mutual fund accounts can be added to whenever you want (often or seldom) — and and in small amounts.
After meeting the initial minimum to open your account, you can add just about any amount you want. To make your purchase work out evenly, mutual funds sell "fractional" shares. For example, if you invest $100 in a fund selling at $7.42 a share, the fund organization will credit your account with 13.477 shares ($100.00 divided by $7.42 = 13.477).
Advantage #4: Mutual funds reduce risk through diversification.
Stock funds typically hold from 50 to 500 stocks in their portfolios; the average is around 100. They do this so that any loss caused by the unexpected collapse of any one stock will have only a relatively minor effect on the pool as a whole. Without the availability of mutual funds, the investor with just $2,000 to invest would likely put it all in just one or two stocks (a risky way to go). But by using a mutual fund, that same $2,000 can make the investor a part owner in a large, professionally professio nally researched researched and managed managed portfolio portfolio of stocks. stocks.
Advantage #5: Price movements of mutual funds are more predictable than those of individual stocks.
Their extensive diversification, coupled with outstanding stock selection, makes it highly unlikely that the overall market will move up without carrying almost all stock mutual funds up with it. For example, on Sept. 8, 2008, when the Dow jumped 290 290 points, points, more than than 95% of stock mutual mutual funds funds were up for for the day. day. Yet, of the more than 3,200 stocks that traded on the New York Stock Exchange, only 63% ended the day with a gain. The rest ended the day unchanged (2%) or actually fell in price (35%).
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Advantage #6: The past performance of mutual funds is a matter of public record.
Advisory services, financial planners, and stockbrokers have records of past performance, but how how public are they? And how were they computed? Did they include every recommendation made for every account? Mutual funds have fully disclosed performance histories, which are computed according to set standards. With a little research, you can learn exactly how various mutual funds fared in relation to inflation or other investment alternatives.
Advantage #7: Mutual funds provide full-time professional management.
Highly trained investment specialists are hired to make the decisions as to which stocks to buy. The person with the ultimate decision-making authority is called the portfolio manager. The manager possesses expertise in many financial areas, and hopefully has learned — through through experience — to to avoid the common mistakes of the amateur investor. Most important, the manager is expected to have the self-discipline necessary to doggedly stick with the mutual fund‘s
strategy
even
when
events
move
against
him for a time.
Advantage #8: Mutual funds allow you to efficiently reinvest your dividends.
If you were to spread $5,000 among five different stocks, your quarterly dividend checks might amount to $10 from each one. It's not possible to use such a small amount to buy more shares without paying very high relative commissions. Your mutual fund, however, will gladly reinvest any size dividends for you automatically. This can add significantly to your profits over several years.
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Advantage #9: Mutual funds offer you automatic withdrawal plans.
Most funds let you sell your shares automatically in an amount and frequency of your choosing. This pre-planned selling enables the fund to mail you a check for a specified amount monthly or quarterly. This allows investors in stock funds that pay little or no dividend dividendss to receive periodic cash flow.
Advantage #10: Mutual funds provide you with individual attention.
It has been estimated that the average broker needs 400 accounts to make a living. How does he spread his time among those accounts? The common-sense way would be to start with the largest accounts and work his way down. Where would that leave your $2,000 account? But in a mutual fund, the smallest member of the pool gets exactly the same attention as the largest because everybody is in it together.
Advantage #11: Mutual funds can be used for your IRA and other retirement plans.
Mutual funds offer accounts that can be used for IRAs and 401(k) plans. They‘re especially useful for rollovers (which is when you take a lump sum
payment from from an employer's employer's pension plan because of of your retirement retirement or termination of employment and must deposit it into an IRA investment plan account within 60 days). days). The new IRA rollover account can be opened at a bank, mutual mutual fund, or brokerage house and the money then invested invested in stocks, stocks, bonds, or money market securities. securities. These rollover rollover accounts accounts make it it possible possible for you to transfer your pension benefits to an account under your control while protecting their tax-deferred tax-deferred status. status. They are also also useful for combining combining several several small IRAs into one large one.
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Advantage #12: Mutual funds allow you to sell part or all of your shares at any time and get your money quickly.
By regulation, all open-end mutual funds must redeem (buy back) their shares at their net asset value whenever you wish. It's usually as simple simple as a toll-free phone call. Of course, the amount you you get back will be more more or less than than you initially put in, depending on how well the stocks in the portfolio have done during the time you were a part owner of the pool.
Advantage #13: Mutual funds enable you to instantly reduce the risk in your portfolio with just a phone call.
Most large fund organizations (usually referred to as "families") allow investors to switch from one of their funds to another via a phone call or over the Web and at no cost. One practical use of this feature is that is makes it easy to reallocate your capital between funds that invest in different types of asset classes (large-company growth, large-company value, small-company growth, small-company value, foreign stocks, and fixed-income securities) as your goals and market expectations evolve.
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Advantage #14: Mutual funds pay minimum commissions when buying and selling for the pool.
They buy stocks in such large quantities that they always qualify for the lowest brokerage commissions commissions available. An average purchase purchase of stock stock can easily cost the small investor 2%-4% in commissions to buy and sell (depending on broker, dollar size of order, and number of shares). On the other hand, the cost is a mere fraction of 1% on a large purchase like $100,000. Many investors would show gains rather than losses if they could save almost 3% on every trade! The mutual-fund pool enjoys the savings from these massive volume discounts, enhancing the profitability of the pool. Eventually, then, part of that savings is yours. (These commission savings, however, should not be confused with the annual operating expenses that every shareholder pays.)
Advantage #15: Mutual funds provide a safe place for your investment money.
Mutual funds are required to hire an independent bank or trust company to hold and account for all the cash and securities in the pool. This custodian has a legally binding responsibility to protect the interests of every shareholder. No mutual fund shareholder has ever lost money due to a mutual fund bankruptcy.
Advantage #16: Mutual funds handle your paperwork for you.
Capital gains and losses from the sale of stocks, as well as dividend- and interest-income interest-inc ome earnings, are summarized into a report for each shareholder at the end of the year for tax purposes. Funds Funds also manage the day-to-day chores such as dealing with transfer agents, handling stock certificates, reviewing brokerage confirmatio confirmations, ns, and more. more.
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Advantage #17: Mutual funds can be borrowed against in case of an emergency.
Although you hope it will never be necessary, you can use the value of your mutual fund holdings as collateral for a loan. If the need is short-term and you would rather not sell your funds because of tax or investment reasons, you can borrow against against them rather than sell sell them.
Advantage #18: Mutual funds involve no personal liability beyond the investment risk in the portfolio.
Many investments, primarily partnerships and futures, require investors to sign papers wherein wherein they agree agree to accept personal personal responsibi responsibility lity for certain liabilities liabilities generated by the undertaking. Thus, it is possible for investors to actually lose more money than they invest. This arrangement is generally indicative of speculative endeavours. I encourage you to avoid such arrangements. In contrast, mutual funds incur no personal risk.
Advantage #19: Mutual fund advisory services are available that can greatly ease the research burden.
Due to the tremendous growth in the popularity of mutual fund investing, there has been a big jump in the number of investment newsletters that specialize in researching and writing about mutual funds. My Sound Mind Investing newsletter, for example, offers model portfolios geared to your risk tolerance and stage of life. We provide specific buy/sell recommendations that are updated each month.
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Advantage #20: Mutual funds are heavily regulated by the federal government.
The fund industry is regulated by the Securities and Exchange Commission and is subject to the provisions of the Investment Company Act of 1940. The act requires that all mutual funds register with the SEC and that investors be given a prospectus, which must contain full information concerning the fund‘s history,
operating policies, cost structure, and so on. Additionally, all funds use a bank that serves as the custodian of all the pool assets. This safeguard means the securities in the fund are protected from theft, fraud, and even the bankruptcy of the fund management organization itself. Of course, money can still be lost if poor investment decisions cause the value of the pool‘s investments to fall in
value.
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Disadvantages Of Mutual Fund:
Risks and Costs : Changing market conditions can create fluctuations
in the value of a mutual fund investment. Also there are fees and expenses associated with investing in mutual funds that do not usually occur when purchasing individual individual securities directly.
No Guarantees : As Mutual funds invest in debt as well equities ,
there are no sure returns . Returns depends on the market conditions conditions .
No Control : Investor does not have control on investment , all the
decisions are taken by the fund manager. Investor can just join or leave the show.
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Risk V/S Return:-
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Risk Involved in Mutual Fund:
- Systematic risk influences risk influences a large number of assets. A Systematic Risk significant political event, for example, could affect several of the assets in your portfolio. It is virtually impossible to protect yourself against this type of risk.
Unsystematic Risk - Unsystematic risk is risk is sometimes referred to as
"specific risk". This kind of risk affects a very small number of assets. An example is news that affects a specific stock such as a sudden strike by employees. Diversification is the only way to protect yourself from unsystematic risk. (We will discuss diversification later in this tutorial).
Now that we've determined the fundamental types of risk, let's look at more
specific
types
of
risk,
particularly
when
we
talk
about stocks about stocks and bonds and bonds..
Credit or Default Risk - Credit risk is risk is the risk that a company or
individual will be unable to pay the contractual interest or principal on its debt obligations. This type of risk is of particular concern to investors who hold bonds in their portfolios. Government bonds, bonds , especially those issued by the federal government, have the least amount of default risk and the lowest returns, while corporate bonds tend to have the highest amount of default risk but also higher interest rates. Bonds with a lower chance of default are considered to be investment grade, grade , while bonds with higher chances are considered to be junk be junk bonds. bonds . Bond rating services, such as Moody's, allows investors to determine which bonds are investment-grade, and which bonds are junk.
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Country Risk - Country risk refers risk refers to the risk that a country won't be
able to honour its financial commitments. When a country defaults country defaults on its obligations, this can harm the performance of all other financial instruments instrum ents in that country as well as other countries it has relations rel ations with. Country risk applies to stocks, bonds, mutual funds, options and futures that are issued within a particular country. This type of risk is most often seen in emerging markets or countries that have a severe deficit. (For related reading, see What Is An Emerging Market Economy?)
Foreign-Exchange Risk - When investing in foreign countries you
must consider the fact that currency exchange rates can change the price of the asset as well. Foreign-exchange Foreign-excha nge risk applies risk applies to all financial instruments that are in a currency other than your domestic currency. As an example, if you are a resident of America and invest in some Canadian stock in Canadian dollars, even if the share value appreciates, you may lose money if the Canadian dollar depreciates in relation to the American dollar.
Interest Rate Risk - Interest - Interest rate risk is risk is the risk that an investment's
value will change as a result of a change in interest rates. This risk affects the value of bonds more directly than stocks.
- Political risk represents risk represents the financial risk that a country's Political Risk government will suddenly change its policies. This is a major reason why developing countries lack foreign investment.
35
Market Risk - This is the most familiar of all risks. Also referred to
as volatility, volatility , market risk is the the day-to-day fluctuations in a stock's price. Market risk applies mainly to stocks and options. As a whole, stocks tend to perform well during a bull market and poorly during a bear market - volatility is not so much a cause but an effect of certain market forces. Volatility is a measure of risk because it refers to the behavior, or "temperament", of your investment rather than the reason for this behavior. Because market movement is the reason why people can make money from stocks, volatility is essential for returns, and the more unstable the investment the more chance there is that it will experience a dramatic change in either direction.
36
Mutual Fund Investing Strategies:
Systematic Investment Plan(SIP): These are best suited for young people who have started their career and need to build their wealth.SIPs entail an investor to invest a fixed sum of money at regular interval in the mutual fund scheme the investor has choosen an investor opting SIP in xyz Mutual fund scheme will need to invest a certain some of money every month/quarterly/half yearly/yearly in the scheme.
Systematic Withdrawal Plan(SWP): These plan best suited for people nearing retirement.In these plans,the investor invest in mutual fund scheme and is allowed to withdraw a fixed some of money at regular intervals to take care of his expenses.
Systematic Transfer Plans(STPs): They allow the investor to transfer on periodic basis specified amount from one scheme to another with in the same fund family- meaning two scheme belonging to the same Mutual Fund.Such redemption or Investment will be at applicable on NAV.
37
Factors Affecting Mutual Fund
Government Influences
Taxation Policy
Foreign Trade Regulation
National Income Income
Consumptions and Savings
Employment
Inflation
Money Supply
Interest
Risk Factor
Demographic Environment
Social Factor
Education
38
Latest Asset Under Management For All Mutual Fund Houses March 2014
Change
% Change
1,01,720
1,12,963
11,243
11.05
ICICI Prudential Mutual Fund
87,835
1,06,822
18,987
21.62
Reliance Fund
Mutual
94,580
1,03,542
8,962
9.48
Birla Sun Life Mutual Fund
77,046
89,051
12,005
15.58
UTI Mutual Fund
69,450
74,233
4,783
6.89
54,905
65,499
10,594
19.3
41,564
45,404
3,840
9.24
32,886
41,349
8,463
25.74
Kotak Mahindra Mutual Fund
35,361
33,079
-2,282
-6.45
DSP BlackRock Mutual Fund
32,342
31,631
-711
-2.2
19,897
21,954
2,057
10.34
18,114
18,795
681
3.76
11,169
18,255
7,086
63.44
Mutual Funds Mar-13
HDFC Mutual Fund
SBI Mutual Fund
Franklin Templeton Mutual Fund
IDFC Mutual Fund
Tata Mutual Fund
Deutsche Fund
Mutual
L&T Mutual Fund
39
Sundaram Mutual Fund
14,871
16,422
1,551
10.43
JPMorgan Mutual Fund
15,856
16,248
392
2.47
Axis Mutual Fund
12,114
16,154
4,040
33.35
Religare Invesco Mutual Fund
14,202
14,496
294
2.07
LIC NOMURA Mutual Fund
7,185
10,584
3,400
47.32
Baroda Pioneer Mutual Fund
7,303
8,106
803
10.99
HSBC Mutual Fund
5,230
7,659
2,429
46.44
Canara Robeco Mutual Fund
8,851
6,499
-2,352
-26.58
JM Financial Mutual Fund
7,411
6,046
-1,365
-18.42
IDBI Mutual Fund
6,249
5,929
-320
-5.12
PRINCIPAL Mutual Fund
5,573
4,134
-1,439
-25.83
Peerless Fund
4,875
4,046
-829
-17
Mutual
40
Goldman Sachs Mutual Fund
4,800
3,764
-1,036
-21.58
Taurus Fund
4,732
3,532
-1,199
-25.34
BNP Paribas Mutual Fund
3,726
3,446
-280
-7.52
Union KBC Mutual Fund
3,118
2,847
-271
-8.7
Morgan Stanley Mutual Fund
2,660
2,572
-88
-3.32
Pramerica Mutual Fund
2,592
2,411
-182
-7.01
BOI AXA Mutual Fund
1,104
1,991
887
80.36
Indiabulls Mutual Fund
2,639
1,097
-1,542
-58.43
Mirae Asset Mutual Fund
540
692
152
28.16
PineBridge Mutual Fund
1,099
649
-450
-40.96
ING Mutual Fund
993
564
-429
-43.2
Motilal Oswal Mutual Fund
539
489
-49
-9.16
280
356
77
27.39
Mutual
41
Quantum Fund
Mutual
Escorts Fund
Mutual
255
269
14
5.43
IIFL Mutual Fund
210
234
24
11.63
Sahara Fund
254
191
-63
-24.91
259
169
-89
-34.59
8,16,391
9,04,174
87,783
9.71
Edelweiss Fund Total
Mutual
Mutual
42
Major Mutual Fund Companies In India
Birla Sun Life Mutual Fund
Bank Of Broda Mutual Mutual Fund Fund
HDFC Mutual Fund
HSBC Mutual Fund
ING Vysa Mutual Fund
ICICI Prudential Mutual Fund
Sahara Mutual Fund
SBI Mutual Fund
TATA Mutual Fund
Kotak Mahindra Mutual Fund
UTI Mutual Fund
Realince Mutual Fund
Franklin Templeton Indian Mutual Fund
Morgan Stanley Mutual
Escorts Mutual Fund
Benchmark Mutual Fund
Canara Robeco Mutual Fund
LIC Mutual Fund
43
Registration Of Mutual Fund: Application for registration An application for registration of a mutual fund shall be made to the Board in Form A by the sponsor. Application fee to accompany the application
Every application for registration under regulation 3 shall be accompanied by non-refundable application fee as specified in the Second Schedule. Application to conform to the requirements
An application, which is not complete in all respects shall be liable to be rejected: Provided that, before rejecting any such application, the applicant shall be
given an opportunity to complete such formalities within such time as may be specified by the Board. Furnishing information
The Board may require the sponsor to furnish such further information or clarification as may be required by it. Eligibility criteria
For the purpose of grant of a certificate of registration, the applicant has to fulfill the following, namely — (a) the sponsor should have a sound track record and general reputation of fairness and integrity in all his business transactions. Explanation: For the purposes of this clause ―sound track record‖ shall mean the
sponsor should — (i) be carrying on business in financial services for a period of not less than five years; and (ii) the networth is positive in all the immediately preceding five years; and
44
(iii) the networth in the immediately preceding year is more than the capital contribution of the sponsor in the asset management company; and (iv) the sponsor has profits after providing for depreciation, interest and tax in three out of the immediately preceding five years, including the fifth year; 11[(aa) the applicant is a fit and proper person. (b) in the case of an existing mutual fund, such fund is in the form of a trust and the trust deed has been approved by the Board; (c) the sponsor has contributed or contributes at least 40% to the net worth of the asset management company: company: Provided that any person who holds 40% or more of the net worth of an asset
management company shall be deemed to be a sponsor and will be required to fulfil the eligibility criteria specified in these regulations; (d ) the sponsor or any of its directors or the principal officer to be employed by the mutual fund should not have been guilty of fraud or has not been convicted of an offence involving moral turpitude or has not been found guilty of any economic offence; (e) appointment of trustees to act as trustees for the mutual fund in accordance with the provisions of the regulations; ( f f ) appointment of asset management company to manage the mutual fund and operate the scheme of such funds in accordance with the provisions of these regulations; ( g g ) appointment of custodian in order to keep custody of the securities or gold and gold related instrument or other assets of the mutual fund held in terms of these regulations, and provide such other custodial services as may be authorised by the trustees.
45
Criteria for fit and proper person
For the purpose of determining whether an applicant or the mutual funds is fit and proper person the Board may take into account the criteria specified in schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations,2008. Consideration of application
The Board, may on receipt of all information decide the application. application. Grant of Certificate of Registration
The Board may register the mutual fund and grant a certificate in Form B on the applicant paying the registration fee as specified in Second Schedule. Terms and conditions of registration
The registration granted to a mutual fund under regulation 9, shall be subject to the following terms and conditions — (a) the trustees, the sponsor, the asset management company and the custodian shall comply with the provisions of these regulations; (b) the mutual fund shall forthwith inform the Board, if any information or particulars previously previously submitted to the Board was misleading or false in any material respect; (c) the mutual fund shall forthwith inform the Board, of any material change in the information or particulars previously furnished, which have a bearing on the registration granted by it; (d ) payment of fees as specified in the regulations and the Second Schedule. Rejection of application
Where the sponsor does not satisfy the eligibility criteria mentioned in regulation 7, the Board may reject the application and inform the applicant of the same. Payment of 14[annual] service fee12. A mutual fund shall pay before the 15th
April each year a service fee as specified in the Second Schedule for every financial year from the year following the year of registration:
46
Company Profile
Industry
Distribution
Founded
1994
Head Quarters Surat, Gujrat, Gujrat, India Products
Financial Instruments
Revenue
16000 Crore
Employees
17000
Branches
In 120+ cities
Website
http://www.njfundz.com
47
About NJ: Doing the 'right' thing is a virtue most desirable. The difference between success and failure is often not dictated by knowledge or expertise but by its actual application and perseverance. When it comes to successful wealth creation for customers, it is something that we believe & practice. For us it is more than a mission; it is what defines our lives and our actions at NJ IndiaInvest. With this passion, we continue to evolve and make the right product accessions and service innovations in our offerings. To the advisors, we offer a 360 comprehensive business platform with unmatched IT solutions, empowering them to set the best practice standards and deliver real value to their customers. Over the years, our passion has seen us grow from strength to strength and expand rapidly, setting new benchmarks in the process. But to us, what really matters most is the number of lives we have managed to transform and we still have a long way to go--- NJ India Invest Invest Pvt. Ltd. is one one of the leading leading advisors advisors and distributors distributors of financial products and services in India. Established in year 1994, NJ has over a decade of rich exposure in financial investments space and portfolio advisory advisory services. From a humble beginning, NJ over the years has evolved out to be a professionally professionally managed, managed, quality quality conscious conscious and customer customer focussed focussed financial / investment advisory & distribution firm.
NJ prides in in being a professionally professionally managed, managed, quality focused and customer centric organisation. The strength of NJ lies in the strong domain knowledge in investment consultancy and the delivery of sustainable value to clients with support from cutting-edge technology platform, developed in-house by NJ.
48
At NJ we believe in ..
Having single window, multiple solutions that are integrated for simplicity and sapience.
Making innovations, accessions, value-additions, a constant process.
Providing customers with solutions for tomorrow which will keep them above the curve, today.
NJ had over INR 16,000* Crores of mutual fund assets under advice with a wide presence in over 120+ locations in 26 states in India. The numbers are reflections of the trust, commitment and value that NJ shares with its clients.
At NJ, we continue to innovate, enrich our intellect, and ask critical questions. We challenge our own processes and systems on constant basis to emerge more convinced. At NJ, we continue to expand the scope and depth of our offerings, making apt use of technological support.
Vision & Mission
Vision: To be the leader in our field of business through, through,
Total Customer Satisfaction
Commitment to Excellence
Determination to Succeed with strict adherence to compliance
Successful Wealth Creation of our Customers
49
Mission: Ensure creation of the desired value for our customers, employees and associates, through constant improvement, innovation and commitment to service & quality. To provide solutions which meet expectations and maintain high professional & ethical standards along with the adherence to the service commitments.
DIVISION NJ India Invest Invest has two broad distinct distinct divisions divisions of business business as follows follows
NJ Fund Network: NJ Fundz Network, started in 2003, is a dedicated channel for providing providi ng independ independent ent financial advisors or IFA's with a complete business platform for the strengthe strengthening ning and developm development ent of their advisory practice. NJ offers advisors under its network will all the products; suppor supportt and services that enables them add considerabl considerablee value to their business, emerge as a 'new age professional financial advisor'
and
compete
confidently
in
the
industry.
NJ Fundz Network is a unique, first time in India concept that offers such comprehensive business platform to independent financial advisor.
NJ Wealth Advisors: Established as a distinct entity, NJ Wealth Advisors Pvt. Ltd. seeks to offer comprehensive financial planning and portfolio advisory services to premium clients. With NJ Wealth Advisors, NJ seeks to leverage the
50
strong financial advisory and portfolio management skills gained in over a decade of experience in the industry. NJ Wealth Advisors offers its clients with quality, unbiased, need-based advisory services & investment solutions.
NJ Gurukul: sporadic growth in terms of need of performers in financial advisory services has lead to the crunch of available performers. Though lots of youngsters are getting into financial advisory services, but the greatest challenge is of RIGHT SELLING, for which adequate Training is a prerequisite. prerequisi te. Advisor Advisory y function demands updated knowledge, backed up by honed skills to fetch effective business. Building long term relationship with clients depends upon possessing clear edge over others in the field. Hence continuous people development has an important role in building this fraternity.
Technology: Technology has traditionally been NJ's key strength. Our offering on the technological front is unmatched, vibrant, and comprehensive in nature. Our focus & commitment on technology can be gauged from the fact that we have set-up distinct entity with a very strong, talented work-force for the sole purpose of providing the best to NJ in terms of technology and support. Finlogic Technologies (India) Pvt. Ltd. does all the development & support work in-house on a continuous basis. It has successfully developed & implemented a powerful support system for the mutual fund distribution business at NJ with a provision for integrating the same with other investment products as well as the financial accounting system.
51
Management
The management at NJ brings together a team of people with wide experience and knowledge in the financial services domain. The management
provides
direction
and
guidance
to
the
whole
organisation. The management has strong visions for NJ as a globally respected company providing comprehensive services in financial sector.
The 'Customer First' philosophy in deeply ingrained in the management at NJ. The aim of the management is to bring the best to the customers in terms of -
Range of products and services offered
Quality Customer Service
All the key members of the organisation put in great focus on the processes & systems under the diverse functions of business. The management also focuses on utilizing technology as the key enabler for all the activities and to leverage the technology for enhancing overall customer experience.
The key members of the management are:
Mr. Neeraj Choksi
Mr. Jignesh Desai
(Jt. Managing Director) (Jt. Managing Director)
52
Key Sales Team: Mr. Misbah
National
Baxamusa
Head
Mr. Naveen Rathod
V.P. (Sales)
Mr.Kulbhushan A.V.P. Nandwani
(Marketing)
Mr. Prashant
A.V.P.
Kakkad
(Sales)
Key Executive Team :-
Mr. Shirish Patel
(Information Technology)
Mr. Abhishek Dubey
(Business Process)
Mr. Vinayak Rajput
(Operations)
Mr. Dhaval Desai
(Human Resources)
Mr. Col. Dixit
(Administration)
53
Offerings:Products:
NJ offers advisory advisory and distribution distribution services services on the the following following products. products. Investment Products:
Mutual funds – covering covering all AMCs & all schemes,
Fixed Deposits of companies,
PMS products (Third party & NJ)
Government/RBI bonds,
Infrastructure Bonds,
Approved securities securities for charitable trusts, etc Real Estate:
Residential properties
Commercial properti properties es Training & Education:
Certification training courses
AMFI
CFP
Training products
54
People & Culture:-
People:
Enthusiasm, Enterprise, Education and Ethics form the four pillars at NJ. At NJ one one can witness witness the vibrant vibrant energy, energy, enthusiasm and the enterprising drive to excel flowing freely throughout the organisation. At NJ can also experience the creativity, one-to-one responsiveness, responsiveness, collaborative approach and passion for delivering value.
At NJ people evolve to be more effective, efficient, and result oriented. Knowledge is inherent due to the education-cent education-centric ric approach and the experience in handling different clients groups across diverse product profiles. NJ understa understands nds that the people are the most important assets of the company and it is not the company that grows but the people. NJ hence undertakes rigorous training and educational activities for enhancing the entire team at NJ. NJ also believes in the ‗Learning through Responsibility‘ concept for its employees.
For people at NJ success is not a new word, but is a regular steppingstone to realising the one vision that everyone shares.
55
Culture:
At NJ we believe in transforming the lives of our customers. We exist to create a difference – a a change towards a better life. The culture at NJ reflects this responsibility, this dream of transforming lives. And we at NJ are always excited excited and enthused enthused in doing so. so.
We believe in keeping
„You First‟,
providing you with products and
services that meet your stated and unstated needs. Client satisfaction and client service is the Mantra we constantly recite. This service oriented philosophy runs throughout the organization, from top to bottom. Employees are given ample freedom in their work. The objective is to keep an open, healthy environment with ample scope for enterprise, improvement, innovations and out-of-the box solutions Our efforts are constantly engaged in improving our existing services, offering new and innovative solutions that go beyond your expectations. This focus has made us one of the most respected and preferred service service providers, providers, especially especially in the the mutual fund fund industry industry
56
Service Standards Service is the key to unlocking customer satisfaction, which again is key for sustainability of any business. At NJ we understand this very well. NJ has set strict processes in place to deliver quality services to customers. At NJ strict quality service standards are set and a welldefined process is established and followed religiously by our quality customer service teams. Performance is evaluated on a frequent basis and glitches are ironed out. But quality service also involves quality people in addition to processes. NJ gives significant focus to the proper training and development of the people involved in the service delivery chain. Further we,
Have well-defined "Privacy Policy" to keep clients‘ information confidential & internal audits done on the same at regular intervals
Receive various statistics which are analysed on an ongoing basis to improve the service standards
We are committed to improve and enhance our services and undertake new service initiatives. Such and other services differentiate us with other service providers in the industry.
Our Service
Commitments …
The service commitments are to guide the actions of the people at NJ. Clearly stated, customers can freely communicate any such actions/events wherein they feel that any of the following commitments have been breached / comprom compromised. ised. At NJ we desire to honour our commitments at all points of time and to all our customers without any bias.
To provide customer-f customer-focussed ocussed need-based valued services
57
To provide reliable, accurate and timely information
To maintain all records in privacy
To optimise services/benefits at least justifiab justifiable le cost
To develop and grow the customers ‘ business
To provide constructive after sales service
To honour our service commitments
Consumer Grievances:
At NJ, we are committed to provide our customers with quality services. The existings customers may approach NJ Customer Care for any queries / clarifications or issues that they may face. For the customers of Demat & Trading Account services, we have a dedicated DP Helpdesk which can be reached at
[email protected], for any queries or grievances.
58
Recognitions Some of the awards & recognitions that we have received in past.. Year 2000:
For Outstanding Performance presented by Chairman, Prudential Plc. at London
Year 2002:
For Outstanding Performance presented by Group Chief Executive, Prudential Plc. at London
Year 2003:
For Outstanding Performance presented by Group Chief Executive, Prudential Plc. at London
Year 2004:
Among Most Valued Business Associates presented by HDFC Standard Life at Edinburgh, Scotland
Year 2004:
For Outstanding Performance by Deputy CEO, Prudential Singapore at Malaysia
Year 2006:
Award for mobilising the Highest Number of SIPs at National Level by Fidelity Mutual Fund Plc at Mumbai
Year 2006:
Award – Vietnam Vietnam
59
Comments from Industry Stalwarts:
The essence of investment consultancy lies in optimal asset allocation as against security selection or timing the markets for clients. NJ understands this very well and has added significant value to the clients through this approach. I am sure with this new initiative; a much larger number of clients will be able to benefit from this approach. I wish them all the best in this initiative - Prashat Jain, CIO, HDFC AMC
The success of any business lies in innovation ahead of times and NJ has proved it time again a gain - Rajan Krishnan, Principal Principal Pnb AMC
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WHY INSURANCE AGENTS SHOULD SELL MUTUAL FUND? Reason 1: Easy to make more clients
The Penetration of Mutual Funds is very low
The Penetration of Insurance is very high
Opportunity for you to acquire more clients
Now no call of yours yours should should get waste
Reason 2: low competition of mutual fund advisors:-
Lack of competition represents a very big opportunity to grow your business anywhere in India.
> 22 Lacs Insurance Advisors V/s < 70,000 Mutual Fund Advisors (Very Few Financial Advisors) (>35 Insurance Advisors V/S 1 Mutual Fund Advisor)
A huge DEMAND of Quality Mutual Fund Agents
There is a genuine need for more than 2 lakh mutual fund advisors in India...(our estimates)
Reason 3: More satisfaction to your clients:-
61
If you are not selling mutual funds then you must not be aware of what they truly are and the possibilities that they offer in providing solutions that meet the diverse needs of different clients. With mutual funds in your offering, you are in a much better position to fully meet the clients financial and investment needs. Your client would ideally like you to do that and will be happy once to offer him multiple solutions.
Reason 4: Additional source of income:
Mutual fund is one product today that potentially has no limits to the volumes that you can generate.
The important differentiation differentiation here with insurance insurance is that you income is not basedon the premium you collect but on the entire Assets Under Management that you have mobilized to counter the low rates.
An agents AUM running into crores in quite common in the industry. The income from mutual funds can complement your earnings from insurance and may even substitute them in future .
Reason 5: Leveraging existing clientele base:
How to get more out of what you already have?
Well, mutual fund is just the perfect answer to that question.
The truth is that there is a lot of potential to generate further income from your existing clientele base.
Much of the investment investment needs of clients are unexplored unexplored and unfulfilled unfulfilled that you can satisfy.
62
Reason 6: Strong industry growth ahead:-
There is a very strong growth of mutual funds ahead.
The reasons are many good product, low penetration, huge market, growing income, changing mindset, lack of other attractive investment products, etc.
In US, almost every third household invests in mutual funds.
The US MF industry size is about 67% of the US GDP and is 1.5 times of the bank deposits in US.
The situation is though almost opposite in India with the MF industry size here equal to6% of GDP and bank deposits are 10.50 times of the total industry size.
The potential is huge and India is expected to follow in on the lines of the more developed countries. countries.
Reason 7: Retention and loyalty of clients:
The underlying logic can be found in the growth of multiplexes, shopping malls,after all the human nature is basically the same .
People today look for easy, fast, and single service point that provides them with solutions solutions that meets meets their multiple multiple needs.
Your client would probably invest in mutual funds some day or later.
Why not you do the same before anyone else gets to your client?
63
Reason 8: Greater choice of products:
Till now we haven‘t really talked about what choices you can offer to
your clients ... In fact, you can offer cash-flow management, to long-term goal oriented planning to your clients.
Your basket would include pure equity funds (Diversified / Sectoral / Index Funds) to pure debt funds (Gilt / Income / Short Term Plans / Floating / Liquid Funds) to hybrid funds (MIPs / Balance / Arbitrage Funds) to the tax saving ELSS.
With a vast range of Fund houses and many more schemes the choices are virtually endless, endless, and one is sure to find what one needs.
Reason 9: Be a Complete Financial Financial Advisor
What next to Insurance?
There is an opportunity for you to transcend to the next level and offer real solutions that will truly add value to your clients.
You should develop yourself and grow more as a µFinancial advisor rather than just Insurance agent.
The learning can extend beyond products to markets, to equities, debt, economy, etc to understanding real financial planning, funds management, etc.
64
Research Methodology Title of The Study:-
A study of Mutual Fund and awareness among Insurance Advisors
OBJECTIVE OF STUDY:1) Understanding Mutual Funds 2) Understanding Market Potential of Mutual funds. 3) Understanding which mutual fund is good for whom 4) Analyzing Awareness of Mutual Funds among insurance advisors.
65
Method Of Study Data Collection:-
1. Primary Data 2. Secondary Data Note:- Data for for the study study was collected collected by the the survey method with with accessories questioners keeping in mind objectives. The primary for attaining the objective while the secondary data were used to write the literature & get information. information. Primary Data:-
Primary data can be obtained through direct communication with respondent or through personal interaction. Their are several methods of collecting primary data through survey and descriptive research. I have used questioner from as of collecting primary data. Which have been very useful for me to analyze actual market condition and awareness of mutual and mutual fund advisors. Secondary Data:-
Secondary data means ,the data has already collected and analyzed by someone else. Various sources of secondary data are as follows: Books Magazines Internet Newspapers Reports Projects etc.
66
Data source:
The study is based on primary data only.For this, A questionnaire was prepared consisting of both open and close ended questions.Answers are collected by personal interview interview with with insurance insurance advisors advisors of different different insurance insurance company company by formal and informal talks.
Sample Size:
The sample size of my project was limited to 100 people. people.
Limitation of the study:
Due to constraint survey was conducted in Pune Main Branch, so result cannot represent the whole market.
67
Questionnaire NameContact no.E-mail-
Q.1.How long you are into Insurance business? a) 0-3 year ( above ( )
)
b) 3-6 year (
)
c) 6-10 year (
)
d) 10 year &
Q.2. Are you in this business full time or part time? a) Part time (
)
b) Full time (
)
Q.3. How many families are you serving? a) 0-50(
)
b) 51-100(
)
c) 101-300(
)
d) 300 and above (
) Q.4. what are the types of Policies you usually sell and % to your total business? business? a)Endowment/Traditional( a)Endowment/ Traditional( d)Pension plan( )
)
b)Pure term plan(
)
c)ULIPS (
)
Q.5.What your customer usually asks for? a) Regular premium (
)
b) One time premium (
)
Q.6.Where does your customer usually prefers to invest? And what %? a)Insurance ( Estate( ) f)Gold/Silver (
)
b) Bank Deposits Deposits ( ) c)Equity ( e)Bonds and company Deposits ( )
)
d)Real
)
Q.7.What are the other Financial/Non financial products products you are dealing in? a)Deposits/Bonds( a)Deposits/Bonds( d)Gold ( )
)
b)Equity(
)
c)Real Estate(
)
68
Q.8.Would you like to become Wealth Advisor for your client? a)Yes (
)
b)No(
)
Q.9.Whether you are interested in doing Financial Planning and cross sales of financial products to your customer? a)Yes (
)
b)No(
)
Q.10.Whether you would like to join NJ Platform? a)Yes (
)
Any suggestion
b)No(
)
69
Summary Of Findings Q.1.How long you are into Insurance business? a) 0-3 year ( above (
)
b) 3-6 year (
)
c) 6-10 year (
)
)
0-3 years
03-06 years
06-10 years
12% 20%
40%
28%
Q.2. Are you in this business full time or part time? a) Part time (
)
b) Full time ( Part time
)
Full time
35%
65%
10 above
d) 10 year &
70
Q.3. How many families are you serving? a) 0-50(
)
b) 51-100(
Family
)
c) 101-300(
0 -5 0
5 1 -1 0 0
)
101=300
d) 300 and above (
)
300 above
12% 22%
25%
41%
Q.4. what are the types of Policies you usually sell and % to your total business? business? a)Endowment/Traditio a)Endowment/Traditional( nal( d)Pension plan(
)
b)Pure term plan(
)
)
Traditional
Pure term plan
ULIPS
25%
0% 15%
60%
Pension plan
c)ULIPS (
)
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Q.5.What your customer usually asks for? a) Regular premium (
)
b) One time premium (
Regular Prem remium
)
One tim time premium
30%
70%
Q.6.Where does your customer usually prefers to invest? And what %? a) Insurance ( d) Real Estate ( f) Gold/Silver (
)
b) Bank Deposits ( )
)
c) Equity (
e) Bonds and company Deposits (
) )
)
Insurance
Bank deposite
Equity
Real Estate
15% 25% 5%
20% 30% 5%
Bonds
Gold/Silver
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Q.7.What are the other Financial/Non financial products products you are dealing in? a) Deposits/Bonds Deposits/Bonds ( ) d) Gold ( )
b) Equity ( )
c) Real Estate (
e) No other product ( )
Deposite/Bonds
Equity
Real Estate
Gold
No other product
2% 5% 10% 8%
75%
Q.8.Would you like to become Wealth Advisor for your client? a)Yes (
)
)
b)No(
)
Yes
No
40%
60%
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Q.9.Whether you are interested in doing Financial Planning and cross sales of financial products to your customer? a)Yes (
)
b)No(
)
Yes
No
45% 55%
Q.10.Whether you would like to join NJ Platform? a)Yes (
)
b)No(
)
Yes
No
10%
90%
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SWOT OF MUTUAL FUND STRENGTHS:-
Large number of potential customers are base.
Government support by way of tax concession for MF investors Volatility of bank interest rate.
Better scope for accessing market information Offer liquidity to the investors at any time.
Offers variety of products to the investors. The size of the market is large.
WAEKNESS:-
Poor participation of retail investors
Lack of focus
Under performance
Poor service conditions
Distribution network is confines only to metro cities
OPPORTUNITIES:-
Huge untapped market in semi-urban and rural areas.
High level of savings habit among the people
Liberalized business environment.
Using on-line mode of trading systems.
Investment opportunities abound in the international market.
Failures of non bank financial company operations.
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THREATS:-
Increasing competition among the players.
High level of volatility in the stock market.
Possibility of more stringent regulations by SEBI, RBI, AMFI, etc . in future.
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CONCLUSION Mutual fund industry in India is still in its adolescent`s adolescent`s stage. It has wide opportunities to advance. With the entry of private player & foreign player, the sector seems poised for growth. With the interest rates falling & people now becoming unwilling unwilling to save in bank,mutual bank,mutual fund can be a better option. But people do not invest invest their hard earned money money in to mutual mutual funds. funds. This is because of unawareness unawareness about about mutual mutual funds & their benefits. benefits. This is is the root cause of slow growth of mutual funds industry. The three reasons for the restricted growth of mutual funds industry in India are:
The mutual funds industry is working confined to the metros & larger cities of the country, baring the large investment potential present in even smaller cities of the country
The mutual fund products are seen to be reasonable complex to be understood by the common middle class person.
Mutual funds are to be providing only the equity stokes. The investor`s investor`s are unaware of the fact that they can also enrich the investor`s portfolio with debt scheme.
We see that all AMC`s firmly admit the fact that India is the most emerging market in Asia.If is as, it means that people have purchased power & disposable income. If the mutual fund can influence these buyers to invest in their funds then it would be benefits to both of them. However, it must be said that even these difficult times, the mutual funds industry is continuing it`s efforts to improve customer satisfaction as well as set new standards in areas such as transparence and disclosure norms. Mutual fund benchmark indices indices have have been devised devised for benchmarking benchmarking the performance performance of individual funds in the India mutual funds market place.
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In order to improve the training process of mutual funds distribution, the association of mutual funds in India (AMFI) has introduced the AMFI certification programme. programme. The security & exchange e xchange Board of India (SEBI) has made it. Mandatory to all distributor &agents of mutual funds to pass the AMFI certification programme. The improvement of knowledge of distributors & agents will ultimately help the investors to make informed investment.
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SUGGSETIONS
Most lead complains about the fees that are RS.4750 they said that it to much amount to complete AMFI exam and become NJ partner. I know it is nothing inspite of our company gives them. Consideration can be made to reduce the fee to stop de motivating from taking our services.
NJ has almost almost 30% market market stake of mutual mutual fund advisor (almost (almost 17,000 17,000 MF advisors are partner of NJ. whereas total MF advisors are 75,000 in India.) but NJ is lacking somewhere in its marketing. NJ needs to advertise its brand to gain the image of a mutual fund distributer in the minds of insurance advisors who are more concern with other mutual fund distributors.
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Bibliography www.njfundz.com
www.amfiindia.com www.moneycontrol.com www.aceanalyser.com Research Methodology- C R Kothari
