Summer Internship Report on Mutual Fund : Performance Evolution & Marketing Essay

SUMMER TRAINING REPORT On Mutual Fund: Performance evolution & Marketing Submitted in partial fulfillment of the requirements of the two year Post Graduate Programme (PGP). Submitted by BIBHUTI JHA Roll No: PGS20090080 Batch: 2009-2011 IILM Institute for Higher Education Under The guidance of Mr. Sunil Sharma Branch Manager Aditya Birla Money Mart Ltd, Faridabad TABLE OF CONTENTS S. NO| PARTICULARS| PAGE NO| 1| ACKNOWLEDGEMENT| 3| 2| DECLARATION | 4| 3| EXECUTIVE SUMMARY | 5| 4| OBJECTIVES | 7| 5| SCOPE OF THE STUDY | 8| 6| METHODOLOGY | 8| 7| INTRODUCTION| 9| | RETORN FROM MUTUAL FUND| 11| 9| TYPE OF MUTUAL FUND| 12| 10| MAJAR PLAYER: INDIAN MUTUAL FUND COMPANIES | 16| 11| SIP: THE SYSTEMATIC INVESTMENT PLAN| 19| 12| COMPANY PROFILE : ADITYA BIRLA MONEY| 22| 13| MANAGEMENT TEAM| 24| 14| BACKGROUND | 25| 15| INITIAL METHODA OF INVESTMENT | 33| 16| DATA| 52| 17| REGRESSION| 61| 18| BIBLIOGRAPHY| 69| 19| ANNEXURE| 71| 20| PASSAGE TO ABMML, FARIDABAD| 101| ACKNOWLEDGEMENT The success of any research study depends upon a number of factors among which the proper guidance from the experts in the industry and a faculty plays an important role.

I take this opportunity to convey our sincere thanks and gratitude to all those who have directly or indirectly helped and contributed towards the completion of this project. I take here a great opportunity to express my sincere and deep sense of gratitude to Mr. Abhishek Joshi (RSM – Aditya Birla Money Mart Ltd) for giving me an opportunity to work on this project. The support & guidance from Sir, was of great help & it was extremely valuable. I wish to place on record my deep sense of gratitude to Mr. Sunil Sharma a highly esteemed and distinguished mentor for his expert advice and help.

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I take this platform to convey my gratitude to the officials of Aditya Birla Money for their prompt response and guidance. I would like to express my gratitude to Ms. Shruti Sharda. Without her outright support and prompt response, it would not be possible to do any justice as well as bring authenticity to the project. I would like to be debtor to my college mentor Mrs. Shweta Mehta and Mr. Sahrsh Bembey from placement cell for constant support and encouragement along with faculties of IILM who train me to enter business era.

Bibhuti Jha Summer Management Trainee (SMT) Aditya Birla Money Mart Ltd. Faridabad 1 DECLARATION I hereby declare that the Project work entitled, Mutual Fund: Performance Evolution & Marketing submitted by me for the partial fulfillment of the Post Graduate Program (PGP) to IILM Institute for Higher Education, is my own original work and has not been submitted earlier either to IILM or to any other Institution for the fulfillment of the requirement for any course of study.

I also declare that no chapter of this manuscript in whole or in part is lifted and incorporated in this report from any earlier / other work done by me or others. Place : Faridabad Date: 30/6/2010 Name of Student: Bibhuti Jha Address: IILM Institute for Higher Education Golf Course Road, Sector – 53 Gurgaon, State – Haryana Executive summary This study has been undertaken to evaluate the performance of the Mutual Funds and marketing of it because Mutual funds have been a significant source of investment in both government and corporate securities for long run.

A mutual fund is a scheme in which several people invest their money for a common financial cause. The collected money invests in the capital market and the money, which they earned, is divided based on the number of units, which they hold. To get a realistic and holistic view of the SIP this is a mouthed to invest money in mutual fund as Birla sun life mutual fund. To get a more detailed understanding of a particular function of the company, I studied the need, uses and benefits of SIP with respect to the wealth management, equity, sales and distribution.

Different statistical tools were used on the data obtained to get the average returns, absolute returns, standard deviation, Fund Beta, R-squared value, residual value, Relative Performance Index were calculated. These variables of the funds were compared with the same variables of the market to assess how the different funds have performed against the market. A Statistical test, Mann Whitney U-Test, was done on the returns of the fund with respect to the Sensex returns. Another U-Test was done taking absolute return as the variable.

These U- Test were done to test the hypothesis which was that the fund returns over the period of time are similar to the market returns over the period of time. All the funds were classified into a hierarchical cluster on the basis of their average returns, absolute returns, standard deviation, fund beta, and relative performance index. This classification was to see whether the funds have similar properties or not. The mutual fund industry started in India in a small way with the UTI Act creating what was effectively a small savings division within the RBI.

Over a period of 25 years this grew fairly successfully and gave investors a good return, and therefore in 1989, as the next logical step, public sector banks and financial institutions were allowed to float mutual funds and their success emboldened the government to allow the private sector to foray into this area. The advantages of mutual fund are professional management, diversification, and economies of scale, simplicity, and liquidity. The disadvantages of mutual fund are high costs, over-diversification, possible tax consequences, and the inability of management to guarantee a superior return.

The biggest problems with mutual funds are their costs and fees it include Purchase fee, fee, Exchange fee, Management fee, Account fee & Transaction Costs. There are some loads which add to the cost of mutual fund. Load is a type of commission depending on the type of funds. Mutual funds are easy to buy and sell. You can either buy them directly from the fund company or through a third party. Before investing in any funds one should consider some factor like objective, risk, Fund Manager’s and scheme track record, Cost factor etc. There are many, many types of mutual funds.

You can classify funds based Structure (open-ended & close-ended), Nature (equity, debt, balanced), Investment objective (growth, income, money market) etc. The most important trend in the mutual fund industry is the aggressive expansion of the foreign owned mutual fund companies and the decline of the companies floated by nationalized banks and smaller private sector players. Reliance Mutual Fund, UTI Mutual Fund, ICICI Prudential Mutual Fund, HDFC Mutual Fund and Birla Sun Life Mutual Fund are the top five mutual fund company in India.

Birla Sun Life mutual funding is considered to be most reliable mutual funds in India. People want to invest in this institution because they know that this institution will never dissatisfy them at any cost. All the mutual funds gave similar returns with respect to the market expect for certain time period. There is a positive correlation with the absolute returns of the market and the mutual funds over the period of time. The study showed that the standard deviation of the funds were high during the boom period in comparison with the market and were comparatively lower when the recessionary trend started.

The fund betas also show that there is significant correlation between the fund returns and the market returns. OBJECTIVES The objective of this project is to study the MUTUAL FUND implementation at ADITYA BIRLA MONEY and with the help of this domain, to get an insight into the needs of SIP in financial business run on a big scale, various functions performed by the SIP, benefits derived out of such a system and the risks involved. I intend to aim my study at analyzing the business needs of the organization, key challenges or desired functional requirements of the Mutual Fund, the ales and marketing solution that is currently implemented and the outcome of such a financial sector * To understand the mutual fund used in wealth management to long run for Indian Economy * To know about the type of mutual fund sold by Aditya Birla Money Mart Ltd. * To understand the deployment levels of SIP in wealth management of ABMML. * To know about the e-business activities of the mutual Fund * To know about the problems faced by the sales team and failures occur at the time of selling mutual fund to the customer. To give a brief idea about the benefits available from Mutual Fund investment * To give an idea of the type of schemes available. * To discuss about the market trends of Mutual Fund investment. * To study some of the mutual fund schemes. * To know mutual fund companies and their fund * Observe the SIP * To give an idea about the regulation of mutual funds. SCOPE OF THE STUDY The scope of my study is to understand the reasons behind the need of SIP in Aditya Birla Money.

I will develop knowledge of what information is needed on a regular basis for selling mutual fund and how it is sought and used by ADITYA BIRLA MONEY with the help of this report. I will study how to sale financial product to the customer and support to the Company as a whole with special emphasis on portfolio Management practiced in the Sales Department of the company. Through my interaction with the executives of ADITYA BIRLA MONEY MART, I got an insight about the effectiveness of the Mutual fund in place at the organization. METHODOLOGY

The Primary Data was collected from the Implementation of Branch Managers in the Selling department of Aditya Birla Money Mart Ltd by conducting interviews and collecting documentation which gave an insight into the procedures being followed with regards to the functioning of Mutual Fund. The Secondary Data was taken from various online sources like the website of the company www. adityabirla. com, search engine as Google, yahoo and various reference books on assets management INTRODUCTION:-mutual Fund An ideal investment vehicle where a number of investors come together to pool their money with common investment goal is known Mutual fund.

Respective Asset Management Company (AMC) manages each Mutual Fund with different type of schemes. An investor can invest his money in one or more schemes of Mutual Fund according to his choice and becomes the unit holder of the scheme. Fund manager in different types of suitable stock and securities, bonds and money market instruments then invests the invested money in a particular scheme of a Mutual Fund. Each Mutual Fund is managed by qualified professional men, who use this money to create a portfolio, which includes stock and shares, bonds, gilt, money-market instruments or combination of all.

Thus Mutual Fund will diversify your portfolio over a variety of investment vehicles. Mutual Fund offers an investor to invest even a small amount of money. It gives small investor access to a well-diversified portfolio of either equities or securities. Each shareholder participates in the gain or loss of the fund. Shares are issued and can be redeemed as needed. The fund’s net asset value (NAV) is determined each day. Each mutual fund portfolio is invested to match the objective stated in the prospectus.

Respective Asset Management Companies sponsored by financial institutions, banks, private companies or international firms manages Mutual Funds schemes. The biggest Indian AMC is UTI while Alliance, Franklin Templeton etc are international AMC’s. Mutual funds have been a significant source of investment in both government and corporate securities. It has been for decades the monopoly of the state with UTI being the key player, with invested funds exceeding Rs. 300 bn. (US$ 10 bn. ). The state-owned insurance companies also hold a portfolio of stocks.

Presently, numerous mutual funds exist, including private and foreign companies. Banks— mainly state-owned too have established Mutual Funds (MFs). Foreign participation in mutual funds and asset management companies is permitted on a case by case basis. UTI, the largest mutual fund in the country was set up by the government in 1964, to encourage small investors in the equity market. UTI has an extensive marketing network of over 35, 000 agents spread over the country. The UTI scrip’s have performed relatively well in the market, as compared to the Senses trend. However, the same cannot be said of all mutual funds.

All MFs are allowed to apply for firm allotment in public issues. SEBI regulates the functioning of mutual funds, and it requires that all MFs should be established as trusts under the Indian Trusts Act. The actual fund management activity shall be conducted from a separate asset management company (AMC). The minimum net worth of an AMC or its affiliate must be Rs. 50 million to act as a manager in any other fund. MFs can be penalized for defaults including non-registration and failure to observe rules set by their AMCs. MFs dealing exclusively with money market instruments have to be registered with RBI.

All other schemes floated by MFs are required to be registered with SEBI. In 1995, the RBI permitted private sector institutions to set up Money Market Mutual Funds (MMMFs). They can invest in treasury bills, call and notice money, commercial paper, commercial bills accepted/co-accepted by banks, certificates of deposit and dated government securities having unexpired maturity up to one year. Mutual Fund offers several benefits to an investor such as potential return, liquidity, transparency, income growth, good post tax return and reasonable safety.

There are number of options available for an investor offered by a mutual fund. A draft offer document is to be prepared at the time of launching the fund. Typically, it pre specifies the investment objectives of the fund, the risk associated, the costs involved in the process and the board rules for entry into and exit from the fund and other areas of operation. In India, as in most countries, these sponsors need approvals from a SEBI (securities Exchange Board of India) in our case. SEBI looks at track records of the sponsor and its financial strength in granting approval to the fund for commencing operations.

A sponsor then hires an Asset Management Company to invest the funds according to the investment objectives. It also hires another entity to be the custodian of the asset of the fund and perhaps a third one to handle registry work for the unit holder (subscriber) of the fund, in the Indian context, the sponsor promote the Asset Management Company also, in which it holds a majority stake. In many cases a sponsor can hold a 100% stake in the Asset Management Company (AMC). A mutual fund is like a big pizza cut into slices. Each slice is called a share.

The share price is called the Net Asset Value (NAV). Unlike a stock price that will fluctuate all day long, the mutual fund price changes only once a day, at the close of the stock market 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. A mutual fund is a mechanism whereby a financial institution or company pools funds from individuals and invests the pooled amounts in stocks, bonds and other securities.

In other words, you and some other investors come together, pool your funds and entrust it to a company for profit gaining investments. The company in turn invests the collected money in stocks, bonds and other securities. The combined holdings of a mutual fund are its portfolio. Each individual investor is issued units in proportion to the shares owned. Mutual fund investors are known as unit holders. Mutual funds spread the risk of investment by investing in diverse industries. It accommodates investors who can’t spend a lot of money for investing individually. Returns from mutual fund

Depending on the nature of investment and objective, returns from mutual funds can be – Dividends on stocks and interest on bonds earned – Capital gains or appreciation realized by the fund. People would be sharing the income thus earned with other mutual fund investors. The basis of sharing is directly proportional (pro-rata basis) to the number of units of the fund someone own. Types of mutual fund Existing types of mutual funds can be classified into three types. They are: Based on Maturity period: * Open-ended mutual fund * Close-ended mutual funds. Based on Investment objective: * Growth scheme or Equity scheme Income scheme or debt oriented scheme * Balanced scheme * Money market scheme. Other Equity-related schemes: * Tax savings scheme * Index scheme * Sect oral scheme. As a prospective mutual fund investor, you can decide to invest in growth scheme, income scheme or balance scheme either as an open-ended or a close-ended mutual fund. Open ended mutual funds:- If people are looking for a scheme that gives the feasibility for subscription all through the year, an open-ended mutual fund is the appropriate choice. With no fixed maturity period, they can buy and sell units at Net Asset Value (NAV) prices.

Ease of liquidity is the key aspect of open-ended mutual funds. Close ended mutual funds:- Unlike an open-ended mutual fund, you have the option for subscription only during a specified period, normally at the time of public issue of shares or debentures. Also, the maturity period is fixed ranging from 3-15 years. Once the initial public issue of shares is over, you can buy or sell the units on the respective stock exchanges. An additional feature of close-ended mutual fund is the option of selling the units back to the mutual fund, at NAV related prices.

Growth scheme or Equity scheme: If customer does not expect immediate liquidity and willing to gain over a period of time, growth scheme could be your preferred choice. Under the growth scheme, mutual funds invest a majority of funds in equities (shares) and a small portion in money market instruments. Over a long period of time they promise increased return on investments but are exposed to high risks given the perennial fluctuation in equity markets, which is influenced by external factors such as social, political and economic factors. Income scheme:-

Also termed as monthly income scheme, this involves investing in income funds that can fetch you regular and steady income. Investments are made in fixed income securities such as bonds, corporate debentures, money market instruments and government securities. You may not benefit from capital appreciation as it is very limited but the risks are much lower compared to the growth fund. Fluctuations in the equity market may not affect you, but the change in interest rates (as and when it becomes effective) is likely to have an impact on returns.

The net asset value of your funds is likely to increase or decrease with corresponding changes in interest rates. Balanced scheme:- Investing in balanced fund, you enjoy the twin benefits of growth and a regular income. This is possible as the funds are invested both in equities (shares) and fixed income securities (such as bonds, corporate debentures and government securities). This means, in case the proportion of investment is higher in equities than in fixed income securities, as an investor you would be exposed to higher risks. Money Market schemes

Easy liquidity, preservation of capital and moderate income- these are key aspects of money market schemes. Under this scheme, your funds are invested exclusively in short-term instruments such as treasury bills, commercial paper, certificates of deposit and inter-bank call money, government securities etc. Commercially safe, it is less volatile compared to other funds. You can select money market schemes for its short period and less risks. Tax Savings scheme Equity linked savings schemes (ELSS) and pension schemes are the two schemes that offer tax rebates or tax benefits.

Subscriptions to the units not more than Rs. 10, 000 would be eligible to a deduction from Income tax. Governed by the provisions of the Income Tax Act, you can enjoy Tax incentives for investments in specified avenues. However, you cannot assign/transfer/pledge/redeem/switch the units purchased under this scheme until completion of 3 years from the date of allotment of individual units. Index schemes:- Under this scheme, the performance of the market as a whole, or a specific sector is assessed. This helps you to decide on whether to invest on the market as a whole or in any specific fund.

Sector wise schemes Customer can decide to invest in specific sectors namely, FMCG, Information Technology, Banking, Pharmaceuticals etc. Sector schemes pose high risk as compared to equity schemes. This is because the portfolio is less diversified and very specific, concentrating on selected industrial group. Guide for selecting a mutual fund:- Before deciding to invest in a mutual fund, set your objectives, the extent of investment and the duration of investment. * Every investor must carefully read the prospectus to check the goals of the particular mutual fund.

This will also throw light on the fees. Check out the advisors to the mutual fund and who manages it. * Features of scheme, risk factors, expenses, fees and company profile should be given due importance. * Consider past performance of all the schemes of the mutual fund * Compare with other schemes with similar investment objective * Check the market ratings for debt oriented schemes * Assess the returns in the NAV, size of the asset and liquidity features. * Seek expert opinions Advantages of investment in mutual funds * Advantages of professional expertise * Diversified investment options Governed by regulations for investors. * Ease of liquidity * Tax benefits * Low costs/Affordability * Flexibility to achieve financial goals. * Ease of operation (by mail, phone or the internet) Disadvantages of investment in mutual funds * Absence of guarantee on returns * Extra fees and commissions (Ex: loads) * Tax on profit made * Discretion of fund’s manager (not for index funds) About Indian mutual fund The year 1993 was a remarkable turning point in the Indian Mutual Fund industry. The stock investment scenario till then was restricted to UTI (Unit Trust of India) and public sector.

This year marked the entry of private sector mutual funds, giving the Indian investors a wider choice of selecting mutual funds. From then on, the graph of mutual fund players has been on the rise with many foreign mutual funds also setting up funds in India. The industry has also witnessed several mergers and acquisitions proving it advantageous to the Indian investors. Are mutual funds emerging as preferred investment option? Are they safe and will your money be secured with them? Before proceeding to answer these questions, a look at the February 2006, Indian bull market scenario is worth a mention.

For the first time ever, stock market indices in India are at a record high. The Bombay Stock Exchange closed above the 10,000-mark for the first time ever, an ecstatic event in the history of the Stock exchange. Market savvy Indian investors have been busy transacting across sectors such as banking automobile, sugar, consumer durable, fast moving consumer goods (FMCG) and pharmaceutical scripts. And, the Union Finance Minister, Mr. P. Chidambaram, has responded positively and advised investors to take informed decisions or invest through mutual funds. Mutual funds are not considered any more as obscure investment opportunities.

The mutual funds assets have registered an annual growth rate of 9% over the past 5 years. Considering the current trend and the relative positive response of the Indian economy, a much bigger jump is on the anvil. History of Indian Mutual funds:- The history of the Indian mutual fund industry can be traced to the formation of UTI in 1963. This was a joint initiative of the Government of India and RBI. It held monopoly for nearly 30 years. Since 1987, non-UTI mutual funds entered the scenario. These consisted of LIC, GIC and public-sector bank backed Indian mutual funds.

SBI Mutual fund was the first of this kind. 1993 saw the entry of private sector players on the Indian Mutual Funds scene. Mutual fund regulations were revised in 1996 to accommodate changing market needs. With the Sensex on a scorching bull rally, many investors prefer to trade on stocks themselves. Mutual funds are more balanced since they diversify over a large number of stocks and sectors. In the rally of 2000, it was noticed that mutual funds did better than the stocks mainly due to prudent fund management based on the virtues of diversification. Major players – Indian mutual fund ABN AMRO Mutual Fund * Benchmark Mutual Fund * Birla Mutual Fund * BOB Mutual Fund * Canbank Mutual Fund * Chola Mutual Fund * Deutsche Mutual Fund * DSP Merrill Lynch Mutual Fund * Escorts Mutual Fund * Fidelity Mutual Fund * Franklin Templeton Investments * HDFC Mutual Fund * HSBC Mutual Fund * ING Vysya Mutual Fund * JM Financial Mutual Fund * Kotak Mahindra Mutual Fund * LIC Mutual Fund * Morgan Stanley Mutual Fund * PRINCIPAL Mutual Fund * Prudential ICICI Mutual Fund * Reliance Mutual Fund * Sahara Mutual Fund * SBI Mutual Fund * Standard Chartered Mutual Fund * Sundaram Mutual Fund * Tata Mutual Fund * Taurus Mutual Fund * Unit Trust of India * UTI Mutual Fund| Different Indian mutual funds allow investors various solutions ranging from retirement planning and buying a house to planning for child’s education or marriage. Tax-wise stocks and mutual funds work similarly since long-term capital gains from both stocks and equity-oriented mutual funds are tax-free. Well, what are the charges, fees and expenses associated with investing in Indian mutual funds? At the time of entry into a mutual fund, you have to pay an additional charge or entry load along with the value of units purchased. When you exit from the scheme, you will get back the value of the units less the exit load charges.

If you want to switch from one type of mutual fund investment to another, you will be required to pay the exchange fees. Advisory fees, broker fees, audit fees and registrar fees are some of the other recurring expenditures that would be charged to you. These expenses involve administrative and other running costs. In India, SEBI (The Securities and Exchange Board of India) is the regulating authority that SEBI formulates policies and regulates the mutual funds to protect the interest of the Indian investors. There have been revisions and amendments from time to time. Even mutual funds promoted by foreign entities come under the purview of SEBI when operating in India.

SEBI has revised its regulations to allow Indian mutual funds to invest in both gold and gold related instruments. the evolution The formation of Unit Trust of India marked the evolution of the Indian mutual fund industry in the year 1963. The primary objective at that time was to attract the small investors and it was made possible through the collective efforts of the Government of India and the Reserve Bank of India. The history of mutual fund industry in India can be better understood divided into following phases:  Phase1. Establishment and Growth of Unit Trust of India – 1964-87 Unit Trust of India enjoyed complete monopoly when it was established in the year 1963 by an act of Parliament.

UTI was set up by the Reserve Bank of India and it continued to operate under the regulatory control of the RBI until the two were de-linked in 1978 and the entire control was transferred in the hands of Industrial Development Bank of India (IDBI). UTI launched its first scheme in 1964, named as Unit Scheme 1964 (US-64), which attracted the largest number of investors in any single investment scheme over the years. UTI launched more innovative schemes in 1970s and 80s to suit the needs of different investors. It launched ULIP in 1971, six more schemes between1981-84, Children’s Gift Growth Fund and India Fund (India’s first offshore fund) in 1986, Mastershare (India’s first equity diversified scheme) in 1987 and Monthly Income Schemes (offering assured returns) during 1990s. By the end of 1987, UTI’s assets under management grew ten times to Rs 6700 cores. Phase II.

Entry of Public Sector Funds – 1987-1993 The Indian mutual fund industry witnessed a number of public sector players entering the market in the year 1987. In November 1987, SBI Mutual Fund from the State Bank of India became the first non-UTI mutual fund in India. SBI Mutual Fund was later followed by can bank Mutual Fund, LIC Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund, GIC Mutual Fund and PNB Mutual Fund. By 1993, the assets under management of the industry increased seven times to Rs. 47,004 crores. However, UTI remained to be the leader with about 80% market share. Phase III. Emergence of Private Sector Funds – 1993-96

The permission given to private sector funds including foreign fund management companies (most of them entering through joint ventures with Indian promoters) to enter the mutual fund industry in 1993, provided a wide range of choice to investors and more competition in the industry. Private funds introduced innovative products, investment techniques and investor-servicing technology. By 1994-95, about 11 private sector funds had launched their schemes. Phase IV. Growth and SEBI Regulation – 1996-2004 The mutual fund industry witnessed robust growth and stricter regulation from the SEBI after the year 1996. The mobilization of funds and the number of players operating in the industry reached new heights as investors started showing more interest in mutual funds.

Inventors’ interests were safeguarded by SEBI and the Government offered tax benefits to the investors in order to encourage them. SEBI (Mutual Funds) Regulations, 1996 was introduced by SEBI that set uniform standards for all mutual funds in India. The Union Budget in 1999 exempted all dividend incomes in the hands of investors from income tax. Various Investor Awareness Programmers were launched during this phase, both by SEBI and AMFI, with an objective to educate investors and make them informed about the mutual fund industry. In February 2003, the UTI Act was repealed and UTI was stripped of its Special legal status as a trust formed by an Act of Parliament.

The primary objective behind this was to bring all mutual fund players on the same level. UTI was re-organized into two parts: 1. The Specified Undertaking, 2. The UTI Mutual Fund Presently Unit Trust of India operates under the name of UTI Mutual Fund and its past schemes (like US-64, Assured Return Schemes) are being gradually wound up. However, UTI Mutual Fund is still the largest player in the industry. In 1999, there was a significant growth in mobilization of funds from investors and assets under management which is supported sip: the systematic investment plan The Systematic Investment Plan (SIP) is a simple and time honored investment strategy for accumulation of wealth in a disciplined manner over long term period.

The plan aims at a better future for its investors as an SIP investor gets good rate of returns compared to a one time investor. Systematic Investment Plan:- * A specific amount should be invested for a continuous period at regular intervals under this plan. * SIP is similar to a regular saving scheme like a recurring deposit. It is a method of investing a fixed sum regularly in a mutual fund. * SIP allows the investor to buy units on a given date every month. The investor decides the amount and also the mutual fund scheme. * While the investor’s investment remains the same, more number of units can be bought in a declining market and less number of units in a rising market. The investor automatically participates in the market swings once the option for SIP is made. SIP ensures averaging of rupee cost as consistent investment ensures that average cost per unit fits in the lower range of average market price. An investor can either give post dated cheque or ECS instruction and the investment will be made regularly in the mutual fund desired for the required amount. SIP generally starts at minimum amounts of Rs. 1000/- per month and upper limit for using an ECS is Rs. 25000/- per instruction. For instance, if one wishes to invest Rs. 1, 00,000/- per month, then they need to do it on four different dates. SIP investor:- It is easy to become a systematic investor.

One need to plan the saving effectively and set aside some amount of money every month for investment purposes in a fund that is ideally a diversified equity fund or balanced fund. Post dated cheque can be given to the fund house. The investor is at liberty to exit from the scheme depending on the market conditions. Benefits of Systematic Investment Plan Power of compounding: The power of compounding underlines the essence of making money work if only invested at an early age. The longer one delays in investing, the greater the financial burden to meet desired goals. Saving a small sum of money regularly at an early age makes money work with greater power of compounding with significant impact on wealth accumulation. Rupee cost averaging: Timing the market consistency is a difficult task.

Rupee cost averaging is an automatic market timing mechanism that eliminates the need to time one’s investments. Here one need not worry about where share prices or interest are headed as investment of a regular sum is done at regular intervals; with fewer units being bought in a declining market and more units in a rising market. Although SIP does not guarantee profit, it can go a long way in minimizing the effects of investing in volatile markets. Convenience: SIP can be operated by simply providing post dated cheques with the completed enrolment form or give ECS instructions. The cheques can be banked on the specified dates and the units credited into the investor’s account. The SIP facility is available in the Principal Income Fund, Monthly

Income Plan, Child Benefit Fund, Balanced Fund, Index Fund, Growth Fund, Equity fund and Tax Savings Fund. SIP features:- Disciplined investing is vital to earning good returns over a longer time frame. Investors are saved the bother of identifying the ideal entry and exit points from volatile markets. SIP options such as equity, debt and balanced schemes offer a range of investment plans. While there is no entry load on SIP, investors face an exit load if the units are redeemed within a stipulated time frame. The success of your SIP hinges on the performance of your selected scheme. mutual fund: flow chart The company that puts together a mutual fund is called an AMC.

An AMC may have several mutual fund schemes with similar or varied investment objectives. 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. Organization of Mutual Work:- The securities and exchange Board of India (SEBI) mutual fund regulations require 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 shareholder’s interest, rather than the AMC’s A mutual fund is a company that combines, or pools, investors’ money and, generally, purchases stocks or bonds.

Ideally, a fund’s size and resultant efficiency, combined with experienced management, provide advantages for investors that include diversification, expert stock and bond selection, low cost, and convenience. In terms of legal structure, a mutual fund is a corporation that receives preferential tax treatment under the U. S. Internal Revenue Code. The assets of a mutual fund consist almost entirely of the securities it holds in its portfolio. The most common type of mutual fund, called an open-end fund, allows investors to buy and sell stock in it on an ongoing basis. COMPANY PROFILE |  The Mutual Fund Industry is one of the fastest growing sectors in India with an average CAGR of 20% over the past five years.

In this scenario, Birla sun life Mutual Funds is all set to revolutionize the India AMC industry, with a mission to give every class of investors a profitable and prudent investment option with a perfect balance of returns, safety and liquidity. | | | | Today, A US $29 billion corporation, the Aditya Birla Group is in the league of Fortune 500. It is anchored by an extraordinary force of 130,000 employees, belonging to 30 different nationalities. In the year 2009, the Group was ranked among the top six great places for leaders in the Asia Pacific region, in a study conducted by Hewitt Associates, RBL Group and Fortune magazine. In India, the Group has been adjudged the best employer in India and among the top 20 in Asia by the Hewitt-Economic Times and Wall Street Journal Study 2007. Over 60 per cent of the Group’s revenues flow from its overseas operations.

The Group operates in 25 countries – India, UK, Germany, Hungary, Brazil, Italy, France, Luxembourg, Switzerland, Australia, USA, Canada, Egypt, China, Thailand, Laos, Indonesia, Philippines, Dubai, Singapore, Myanmar, Bangladesh, Vietnam, Malaysia and Korea. Globally, the Aditya Birla Group is: | A metals powerhouse, among the world’s most cost efficient aluminum and copper producers. Hindalco- Novelis is the largest aluminum rolling company. It is one of the three biggest producers of primary aluminum in Asia, with the largest single location copper smelter| | No. 1 in viscose staple fiber | | The fourth largest producer of insulators | | The fourth largest producer of carbon black | The tenth largest cement producer globally and largest in India | | Among the best energy efficient fertilizer plants| In India: | Largest premium branded apparel company| | The second largest producer of viscose filament yarn | | The second largest in the chlor-alkali sector | | Among the top five cellular operators | | Among top 10 Indian BPO companies by revenue size | | Among the top five asset management  and private sector  life insurance companies| | Among the top three supermarket chains in the retail business | Rock solid in fundamentals, the Aditya Birla Group nurtures a culture where success does not come in the way of the need to keep learning afresh, to keep experimenting. beyond – business

Transcending business for over 50 years now, the Group has been and continues to be involved in meaningful welfare driven initiatives that distinctly impact the quality of life of the weaker sections of society in India, South-East Asia and Egypt. In India, the Group’s social projects span 2,500 villages. It reaches out to six million people annually through the Aditya Birla Centre for Community Initiatives and Rural Development, spearheaded by Mrs. Rajashree Birla. Its focus is healthcare, education, sustainable livelihood, infrastructure and espousing social causes. The Group runs 42 schools, which provide quality education to over 45,000 children in India’s interiors. Of these 18,000 children receive free education. An additional 8,000 students receive merit scholarships.

Likewise at its 18 hospitals in India, more than 500,000 patients are given extremely subsidized medical care. The Group transcends the conventional barriers of business and reaches out to the marginalized because of its conviction of bringing in a more equitable society. board of directors | Mr. Kumar Mangalam Birla, Chairman | | Mrs. Rajashree Birla  | | Mr. B. L. Shah | | Mr. P. Murari (independent)  | | Mr. B. R. Gupta (independent)  | | Ms. Tarjani Vakil (independent) | | Mr. S. C. Bhargava (independent) | | Mr. G. P. Gupta (independent)  | | Dr. Rakesh Jain, Managing Director | | Mr. Pranab Barua, Whole Time Director| Managing director | Dr.

Rakesh Jain| Chief financial officer | Mr. Sushil Agarwal | Business heads | Dr. Rakesh Jain (fertilisers, insulators, BPO ; IT) | | Mr. Ajay Srinivasan (financial services) | | Mr. Pranab Barua (garments, textiles)  | | Dr. Santrupt Misra (carbon black) | | Mr. Sanjeev Aga (telecom) | | Mr. Lalit Naik (viscose filament yarn) | Company secretary | Mr. Devendra Bhandari | Birla group companies| | ::| Grasim Industries Ltd. | ::| Hindalco Industries Ltd. | ::| Aditya Birla Nuvo Ltd. | ::| UltraTech Cement Ltd. | | Indian companies| ::| Aditya Birla Minacs Worldwide Limited | ::| Essel Mining ; Industries Ltd| ::| Idea Cellular Ltd. | 😐 Aditya Birla Insulators | ::| Aditya Birla Retail Limited | ::| Aditya Birla Chemicals (India) Limited| | | International companies| Thailand| ::| Thai Rayon | ::| Indo Thai Synthetics| ::| Thai Acrylic Fibre| ::| Thai Carbon Black | ::| Aditya Birla Chemicals (Thailand) Ltd. | ::| Thai Peroxide| Philippines| ::| Indo Phil Group of companies| ::| Pan Century Surfactants Inc. | Indonesia| ::| PT Indo Bharat Rayon| ::| PT Elegant Textile Industry| ::| PT Sunrise Bumi Textiles| ::| PT Indo Liberty Textiles| ::| PT Indo Raya Kimia| Egypt| ::| Alexandria Carbon Black Company S. A. E| ::| Alexandria Fiber Company S. A. E| China| ::| Liaoning Birla Carbon| 😐 Birla Jingwei Fibres Company Limited| ::| Aditya Birla Grasun Chemicals (Fangchenggang) Ltd. | Canada| ::| A. V. Group| Australia| ::| Aditya Birla Minerals Ltd. | Laos| ::| Birla Laos Pulp ; Plantations Company Limited| North and South America, Europe and Asia| ::| Novelis Inc. | Singapore | ::| Swiss Singapore Overseas Enterprises Pte Ltd. (SSOE)| Joint ventures| ::| Birla Sun Life Insurance Company| ::| Birla Sun Life Asset Management Company | ::| Aditya Birla Money Mart Limited| ::| Tanfac Industries Limited | | | | | | | | | | | | | OMPANY: ADITYA BIRLA RETAIL L| | | | Aditya Birla money mart ltd| | (Finance ; Investments)| Company History

Aditya Birla Money mart Ltd, formerly known as Apollo Sindhoori Capital Investment Ltd is a leading player in broking space. The company is principally engaged in the business of stock broking and related activities. They have one subsidiary company, namely Apollo Sindhoori Commodities Trading Ltd. The company offers services such as, trading facility in equity segment on and derivative segment on NSE ; BSE through a single screen; trading facility in commodity segment, including bullion, oils, gaur seed etc through their subsidiary; depository Participant services of NSDL and CDSL at major locations; Online bidding for IPO and distribution of mutual fund. The company is headquartered in Chennai.

They are having a strong distribution network of over 221 own and 687 franchisee branches, a large customer base in excess of 175,000 and a scalable business model based on a strong technology backbone and a wide product mix. Aditya Birla Money Ltd, a part of Aditya Birla financial Services Group was incorporated in the year 1995 as Apollo Sindhoori Capital Investment Ltd. Earlier, the company was promoted by Prathap C Reddy, Chairman of Apollo Hospitals Group. In March 2009, the company became a part of Aditya Birla Group, when the group acquired 76% of the company. The company commenced their operations in Chennai in the year 1996. They spent their initial time in establishing and consolidating their presence throughout South India. Until 2001, they stablished their presence in 13 locations throughout the South India. Within four years, they established their presence in over 350 locations all over the country. During the year 2004-05, the company added 106 new offices all over the country. Their subsidiary Apollo Sindhoori Commodities Trading Ltd started their expansion through the branches of the company and during the year, the subsidiary was operating from 100 locations. During the year 2005-06, the company added 120 new offices and the client base rose to 77,000 from around 45,000 of previous year. During the year 2006-07, they added 71 sub-broker offices and 51 branches and the number of customers has gone up by 22780.

During the year 2007-08, the company added 237 offices and the client base stands at over 159,000 recording an impressive growth of 49% from around 107,000 of previous year. During the period, the number of offices has correspondingly gone up from 561 to 798 and the number of own branches growing from 168 to 197. The company’s subsidiary, Apollo Sindhoori Commodities Trading Ltd introduced Systematic Gold Saving Scheme for purchase of gold by investors through Commodity Exchange. The scheme was initially launched in Tamilnadu and latter the scheme was launched all over India. During the year 2008-09, the company added 43 new branches including 18 offices placed in the premises of Birla Sun Life Distribution Ltd.

The active sub-broker offices rose from 539 to 580 during the year. In August 28, 2008, the company entered into Share Purchase Agreement with Aditya Birla Nuvo Ltd for sale of 56% equity shares of the company. Pursuant to this agreement, Aditya Birla Nuvo Ltd made an open offer for purchase of 20% equity shares of the company, which was completed on February 24, 2009. As a result, the company became a subsidiary of Aditya Birla Nuvo Ltd with effect from March 6, 2009. The company changed their name from Apollo Sindhoori Capital Investments Ltd to Aditya Birla Money Ltd with effect from August 3, 2009. COMPANY background Incorporation Year| 1995|

Registered Office| Indian Rayon Compound,, Veraval, Gujarat-362266| Telephone| | Fax| | Chairman| | Managing Director| Kanwar Vivek| Company Secretary| S Balaji| Auditor| S R Batliboi & Associates| Face Value| 1| Market Lot| 1| Listing| Chennai,Mumbai,NSE| Registrar| Cameo Corporate Services Ltd Subramanian Building,1ST Floor No 1,Club House Road, Chennai – 600002| Company Snapshot Aditya Birla Money Ltd, formerly known as Apollo Sindhoori Capital Investment Ltd is a leading player in broking space. The company is principally engaged in the business of stock broking and related activities. They have one subsidiary company, namely Apollo Sindhoori Commodities Trading Ltd.

The company offers services such as, trading facility in equity segment on and derivative segment on NSE & BSE through a single screen; trading facility in……… | | | | | | Financial Ratios| Mar 2010| Liquidity Ratio| Debt-Equity Ratio| 0. 45| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Long Term Debt-Equity Ratio| 0. 35| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Current Ratio| 1. 27| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Turnover Ratio| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fixed Assets| 1. 80| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Inventory| 0. 00| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Debtors| 1. 92| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest Cover Ratio| 6. 95| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PBIDTM (%)| 23. 59| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PBITM (%)| 17. 96| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PBDTM (%)| 21. 00| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | CPM (%)| 15. 1| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | APATM (%)| 9. 39| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ROCE (%)| 24. 96| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RONW (%)| 18. 89| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Valuation Ratios| Mar 2010| Price Earning (P/E)| 29. 53| Price to Book Value ( P/BV)| 5. 10| Price/Cash EPS (P/CEPS)| 18. 45| EV/EBIDTA| 10. 19| Market Cap/Sales| 2. 77| | | | Incorporation Year :  1995| Ownership Group : Birla AV| Sector : FIN| Industry : Finance & Investments| | | | | | | | | | | | | | | | | | | | |

Company Details: Aditya Birla Money Ltd| | | | | | Designation| Director Name| Director| Pankaj Razdan P Sudhir Rao G Vijayaraghavan Manoj Kedia| Managing Director| Kanwar Vivek| Company Secretary| S Balaji| | Present activities of Aditya Birla money mart ltd Depository Services · Mutual Fund Distribution. · Distribution of RBI Bonds, Infrastructure Bonds, Capital Gain Tax Bonds. · IPO Financing (Financing for Subscribing New Initial Public Offerings) etc. Our Services · Extended Business Hours. · Highly Competitive Rates. · Round the Clock Helpdesk service facility and availability on 24/7/365 basis. · Convenience of anywhere accounts management through Internet Personalized and Efficient Service by ABM qualified staff Our Offering · Multiple financial products at a very reasonable cost and in a very convenient manner. · Depository services · Internet trading of securities · Distribution of Mutual Fund Units Distribution of Other Products · ABM is also a Distributor for other financial products like · RBI Relief Bonds (Tax Free) · Infrastructure Bonds · Capital Gain Tax Bonds · Initial Public Offerings etc. Future Plans: · Proposed Activities: · Loan against Shares and Mutual Fund Units. · Funding for Margin Trading · Distribution of Insurance Products. · Facilitating Internet Trading of Securities · Retailing of Debt Instruments. Geographical Expansion based on potentials of respective Markets. Initial methods OF investment Deposit:- The term `deposit’ has been defined as receipt of any money borrowed by the company but not including any of the following:- · Government Borrowings · Borrowings from any financial institutions; · Borrowings from any Banks; · Borrowings from any company · Security deposit; · Advance from purchasing/selling agent · Money received in Trust; · Subscription against application for shares; · Subscription against bonds, debentures, etc. secured by a mortgage with or without option to convert into shares; · Money brought in by issue of any secured bonds/debenture Money brought in by promoters; · Money received from the shareholders of a private limited company or a deemed public company. Limits for accepting deposits:- A company can borrow deposits up to the extent given below:- · Up to 25% of the paid-up capital and free reserves of the company from the public and · Up to 10% of its paid-up capital and free reserves from its shareholders. · Therefore, maximum deposit a company can accept from public/shareholders is 35% of its paid up capital and free reserves as mentioned above. · If the company is a `Government Company’, then it can accept or renew deposits from public up to 35% of its paid up capital and free reserves. “Free Reserves” mean the balance in the share premium account, capital and debenture redemption reserves and any other reserves shown in the balance-sheet of the company and created by appropriation out of the profits of the company, but does not include the balance in any reserve created for repayment of any future liability or for depreciation in assets or for bad debts; · Revaluation of any assets of the company Period of accepting deposits:- A company can invite/accept deposits for a period not less than 6 months and not more than 36 months from the date of acceptance of such deposits or from the date of its renewal. Therefore, a company can accept/invite deposits for a period between 6-36 months.

However, a company may accept deposits up to 10% of its paid up capital and free reserves which are repayable after three months, from the date of such deposits or renewal thereof to meet any of its short term requirements. Maximum rate of interest that a company can offer on fixed deposits is 15%. Fixed deposits Fixed deposits remain the most popular instrument for financial savings in India. They are the middle path investments with adequate returns and sufficient liquidity. There are basically three avenues for parking savings in the form of fixed deposits. The most common are bank deposits. For nationalized banks, the yield is generally low with a maximum interest of 10 to 10. 5% per annum for a period of three years or more.

As opposed to that, NBFCs and company deposits are more attractive. The idea is to select the right company to minimize the risk. Company deposits as a saving instrument have declined in popularity over the last three years. The major reason is the slowdown in economy resulting in default by some companies. Also, some NBFCs simply vanished with the depositors’ money. That is likely to change for the better. Corporate performance is likely to improve and stricter control by RBI should improve NBFCs record. But one still needs to be selective. Let us help you in making the right decision. Post office is a very safe and secure investment avenue.

The money is used in the development of the society as a whole, while it provides steady returns. The biggest advantage of investing in post office schemes is the tax benefit that they provide. Thus a lot of savings go through this channel to dual advantage – tax benefits and steady returns Deposit account A deposit account is an account at a banking institution that allows money to be held on behalf of the account holder. Some banks charge a fee for this service, while others may pay the client interest on the funds deposited. The account holder retains rights to their deposit, although restrictions placed on access depend upon the terms and conditions of the account and the provider. A deposit is a type of asset. Saving deposit

Savings deposits are accounts maintained by commercial banks, savings and loan associations, credit unions, and mutual savings banks that pay interest but can not be used directly as money (by, for example, writing a check). These accounts let customers set aside a portion of their liquid assets that could be used to make purchases. But to make those purchases, savings account balances must be transferred to “transaction deposits” (or “checkable deposits”) or currency. However, this transference is easy enough that savings accounts are often termed near money. Savings accounts, as such constitute a sizeable portion of the M2 monetary aggregate. With savings accounts customer can make withdrawals, but they do not have the flexibility of using checks to do so.

As with a MMDAs (money market deposit account), the number of withdrawals or transfers can make on the account each month is limited Time deposit A time deposit (also known as a term deposit, particularly in Australia and New Zealand) is a money deposit at a bank that cannot be withdrawn for a certain “term” or period of time. When the term is over it can be withdrawn or it can be held for another term. A certificate of deposit is a time-deposit product. Note that the M2 money supply includes funds that can be used directly in payment, such as money market mutual funds and money market deposit accounts (MMDAs). MMDAs are considered by the United States Federal Reserve (the Fed) to be savings accounts and are thus exempt from reserve requirements.

These large transaction accounts not being included in the M1 money supply suggests that the Fed does not pay much attention to ordinary transaction deposits, and in July 2000, it announced that it was no longer setting target ranges for growth rates of the monetary aggregates Transaction deposit Transaction accounts include all deposits against which the account holder is permitted make withdrawals by negotiable or transferable instruments, payment orders of withdrawal, or telephone or preauthorized transfers for the purpose of making payments to third persons or others. However, accounts subject to the rules that permit no more than six preauthorized, automatic, or other transfers per month (of which no more than three may be by check, draft, debit card, or similar order payable directly to third parties) are savings deposits, not transaction accounts Current account

A current account is a deposit account in the UK and countries with a UK banking heritage offering various flexible payment methods to allow customers to distribute money directly to others. Most current accounts have a cheque book; offer the facility to arrange standing orders, direct debits and payment via a debit card. Current accounts may also allow borrowing via an overdraft facility. Current accounts providers include banks, building societies and credit unions. Since the internet revolution most retail banking institutions offer access to current accounts via online banking. Demand deposit A demand account (or demand deposit, demand deposit account) is a deposit account held at a bank or other financial institution, the funds deposited in which are payable on demand.

The primary purpose of demand accounts is to facilitate cashless payments by means of check, bank draft, direct debit, electronic funds transfer, etc. A demand account is commonly known as: · A checking account · A share draft account · A current account · A current account · A cheque account REASON TO INVEST IN DEPOSITS There has been an age old concept of people investing in fixed deposits and other methods of deposits . They follow this concept because again and again investing in different fields might fetch them loss at different stages of life and in order to have a secure future people prefer to invest in one deposit for a particular period of time and withdraw them whenever they need.

In today’s era where people are more concerned about their secure future and due to their busy life they lack knowledge about other methods if investment. BASIC INVESTMENT OBJECTIVE The investment approach will be based on a set of well established but flexible principles that emphasize the concept of sustainable economic earnings and cash return on investment as the means of valuation of companies. Five basic principles serve as the foundation for this investment approach. They are as follows: Focus on the long term There is substantive empirical evidence to suggest that equities provide the maximum risk adjusted returns over the long term. In an attempt to take full advantage of this phenomenon, investments would be made with a long term perspective.

Investments confer proportionate ownership The approach to valuing a company is similar to making an investment in a business. Therefore, there is a need to have a comprehensive understanding of how the business operates. The key issues to focus on are growth opportunities, sustainable competitive advantage, industry structure and margins and quality of the management. Maintain a margin of safety The benchmark for determining relative attractiveness of stocks would be the intrinsic value of the business. The Investment Manager would endeavor to purchase stocks that represent a discount to this value, in an effort to preserve capital and generate superior growth.

Maintain a balanced outlook on the market The investment portfolio would be regularly monitored to understand the impact of changes in business and economic trend as well as investor sentiment. While short-term market volatility would affect valuations of the portfolio, this is not expected to influence the decision to own fundamentally strong companies. History OF mutual fund When three Boston securities executives pooled their money together in 1924 to create the first mutual fund, they had no idea how popular mutual funds would become. The idea of pooling money together for investing purposes started in Europe in the mid-1800s. The first pooled fund in the U. S. was created in 1893 for the faculty and staff of Harvard University. On March 21st, 1924 the first official mutual fund was born.

It was called the Massachusetts Investors Trust. After one year, the Massachusetts Investors Trust grew from $50,000 in assets in 1924 to $392,000 in assets (with around 200 shareholders). In contrast, there are over 10,000 mutual funds in the U. S. today totaling around $7 trillion (with approximately 83 million individual investors) according to the Investment Company Institute. The stock market crash of 1929 slowed the growth of mutual funds. In response to the stock market crash, Congress passed the Securities Act of 1933 and the Securities Exchange Act of 1934. These laws require that a fund be registered with the SEC and provide prospective investors with a prospectus. The SEC (U. S.

Securities and Exchange Commission) helped create the Investment Company Act of 1940 which provides the guidelines that all funds must comply with today. With renewed confidence in the stock market, mutual funds began to blossom. By the end of the 1960s there were around 270 funds with $48 billion in assets. In 1976, John C. Bogle opened the first retail index fund called the First Index Investment Trust. It is now called the Vanguard 500 Index fund and in November of 2000 it became the largest mutual fund ever with $100 billion in assets. One of the largest contributors of mutual fund growth was Individual Retirement Account (IRA) provisions made in 1981, allowing individuals (including those already in corporate pension plans) to contribute $2,000 a year.

Mutual funds are now popular in employer sponsored defined contribution retirement plans (401k), IRAs and Roth IRAs. Mutual funds are very popular today, known for ease-of-use, liquidity, and unique diversification capabilities Mutual funds are not an American invention. The first was started in the Netherlands in 1822, and the second in Scotland in the 1880’s. Originally called investment trusts, the first American one was the NewYork Stock Trust, established in 1889. Most that followed were begun in Boston in the early 1920’s, including the State Street Fund, Massachusetts Investor’s Trust (now called MFS), Fidelity, Scudder, Pioneer, and the Putnum Fund.

The Wellington Fund, the first balanced fund that included both stocks and bonds, was founded in 1928, and today is part of the giant Vanguard Funds Group. In the 1960’s there was a phenomenal rise in aggressive growth funds (with very high risk). Sometimes called “go-go” or “hot-shot” funds, they received the majority of the billions of dollars flowing into mutual funds at that time. In 1968 and 1969, over 100 of these new aggressive growth funds were established. A severe bear market began in the autumn of 1969. People became disillusioned with stocks and mutual funds. “The market’s toast will never get back to where it was! ” was echoed by panicked investors. Unemployment grew; inflation went crazy, and investors pulled billions back out of the funds.

They should have hung in there! Many funds have risen 9,000% since then. The 1970’s saw a new kind of fund innovation: funds with no sales commission called “no load” funds. The largest and most successful no load family of funds is the Vanguard Funds, created by John Bogle in 1977. At the end of the 1920’s there were only 10 mutual funds. At the end of the 1960’s there were 244. Today there are more than 6,500 unique funds and even thousands more that differ only by their share class (how they are sold, and how their expenses are charged). Before I continue with all need to know about mutual funds, here is something that merits ones attention.

Since 1940, no mutual fund has gone bankrupt. You sure can’t say that about banks and savings and loans! GROWTH OF MUTUAL FUNDS SINCE its INCEPTION Just 76 years ago the mutual fund industry was born in the United States. The first open-end mutual fund, Massachusetts Investors Trust was founded on March 21, 1924 and after one year had 200 shareholders and $392,000 in assets. The entire industry, which included a few closed-end funds, represented less than $10 million in 1924. At the end of December 1999, the industry’s explosive growth includes more than 8,000 mutual funds with over $6. 8 trillion in assets. First 27 Years Experienced Slow Growth

Growth for the industry during the first 27 years was slow. In 1951, the number of funds surpassed 100 and the number of shareholders exceeded 1 million. It wasn’t until 1954 that the stock market finally rose above its 1929 peak and by the end of the fifties there were 155 mutual funds with $15. 8 billion in assets. In 1967 funds hit their best year, one quarter earning at least 50% with an average return of 67%, but it was done by cheating using borrowed money, risky options, and pumping up returns with privately traded “letter stock. ” By the end of the 60’s there were 269 funds with a tot


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