Investment

Investment refers to the allocation of money, resources, or capital with the expectation
of generating future income, profit, or appreciation. It involves the purchase or
acquisition of assets, such as stocks, bonds, real estate, or businesses, with the goal of
generating a return on the invested capital over time.

Investing is a deliberate and strategic act undertaken by individuals, businesses, or

institutions to grow their wealth, preserve purchasing power, or achieve specific
financial objectives. The primary motive behind investment is to generate a positive
return on the invested funds, which can come in the form of capital gains, interest,
dividends, rental income, or other income streams.

Why should I invest

Investing can help you achieve your financial goals. Whether you're saving for
retirement, a down payment on a house, your children's education, or a dream vacation,
investing can provide the opportunity to accumulate the necessary funds to reach those
goals.

Certain investment vehicles, such as retirement accounts (e.g., 401(k), IRA), offer tax
advantages. Contributions to these accounts may be tax-deductible or grow tax-free,
providing you with potential tax savings or deferred tax liabilities.

investing allows you to potentially grow your wealth over time. By putting your money
into assets that have the potential to appreciate, such as stocks, real estate, or businesses,
you can generate returns and increase your overall net worth.

When To Start Investing:

The sooner one start investing the better. By investing early, you allow your investments
more time to grow, whereby the concept of compounding increases your income, by
accumulating the principal and interest or dividend earned on it, year after year. The
three golden rules for all investor are:

 Invest early
 Invest regularly
 Invest for long term and not short term
Investment Options Available

here are various investment options available to suit different financial goals, risk
tolerances, and time horizons. Here are some common investment options:

Saving Account: - A savings account is a basic banking product that allows individuals
to deposit and store their money while earning a modest amount of interest. It is an
essential tool for managing personal finances and building a financial safety net. With a
savings account, individuals can securely hold their funds and easily access them when
needed. It offers convenience through features such as online banking, ATM access, and
the ability to make electronic transactions. Savings accounts are generally considered
safe and stable, as they are backed by government deposit insurance programs that
protect account holders' funds up to a specified limit. While the interest rates on savings
accounts are typically lower than other investment options, they provide a low-risk
avenue for individuals to earn some return on their idle cash while maintaining liquidity.
Savings accounts are suitable for short-term savings goals, emergency funds, or as a
place to accumulate funds for future financial needs.

Bank Fixed Deposit: - A Bank Fixed Deposit (FD) is a popular investment option
offered by banks, allowing individuals to deposit a specific amount of money for a
predetermined period at a fixed interest rate. It is a secure and low-risk investment
option that provides stability and guaranteed returns. Bank FDs offer various tenures,
ranging from a few months to several years, giving investors flexibility in choosing the
investment duration that suits their needs. The interest rates on bank FDs are fixed at the
time of deposit, offering predictability and certainty regarding the returns. Bank FDs are
considered safe as they are typically backed by government deposit insurance schemes,
protecting the deposited amount up to a certain limit. They are an attractive option for
conservative investors seeking a reliable investment avenue with a steady income
stream and capital preservation.

Public Provident Fund: - The Public Provident Fund (PPF) is a long-term investment
option offered by the Indian government. It is a popular savings instrument known for
its attractive features and tax benefits. The PPF is open to both employed and self-
employed individuals and provides a secure avenue for building a retirement corpus or
meeting long-term financial goals. It has a lock-in period of 15 years, during which the
deposited amount earns a fixed, tax-free interest rate set by the government.
Contributions made to the PPF are eligible for tax deductions under Section 80C of the
Income Tax Act, offering additional savings on income tax. The PPF combines the
benefits of guaranteed returns, tax efficiency, and capital preservation, making it a
favoured investment choice for individuals seeking a stable and tax-efficient long-term
savings option in India.

Post Office Saving scheme: - Post Office Saving Schemes are a range of investment
options provided by the Indian Postal Department, offering individuals secure and
accessible avenues to save and grow their money. These schemes cater to diverse
financial goals and risk appetites, making them popular among individuals across
various income levels. The Post Office Saving Schemes include options such as savings
accounts, recurring deposits, time deposits, monthly income schemes, National Savings
Certificates (NSC), Kisan Vikas Patra (KVP), and Senior Citizen Savings Scheme
(SCSS). These schemes offer competitive interest rates and tax benefits, making them
attractive to investors seeking stability, reliable returns, and government-backed
security. The convenience of accessibility through post offices across the country makes
these schemes easily accessible, particularly in rural areas. Post Office Saving Schemes
serve as valuable financial tools, encouraging individuals to save, invest, and secure
their financial future.

Government Securities: -Government securities, also known as government bonds or

sovereign bonds, are debt instruments issued by national governments to raise funds for
various purposes, such as financing infrastructure projects, meeting budgetary
requirements, or managing fiscal deficits. These securities are considered to be among
the safest investment options as they are backed by the full faith and credit of the
issuing government. Government securities typically have fixed interest rates and
maturities, offering predictable income streams and repayment schedules. They are
considered low-risk investments, providing stability and capital preservation.
Government securities can be purchased by individual investors, institutional investors,
or even foreign entities. They are traded in the secondary market and can provide
liquidity to investors if needed. Government securities play a crucial role in the financial
markets, serving as benchmark instruments for interest rates, influencing borrowing
costs across the economy, and offering a reliable investment avenue for individuals
seeking low-risk returns.
Equity share market: - The equity share market, also known as the stock market or the
stock exchange, is a platform where shares of publicly traded companies are bought and
sold. It is a vital component of the financial system, facilitating the exchange of
ownership in companies through the buying and selling of stocks. The equity share
market provides a mechanism for companies to raise capital by selling shares to
investors. Investors, on the other hand, have the opportunity to participate in the
ownership and potential growth of these companies. The stock market is known for its
dynamic nature, with prices of stocks fluctuating based on various factors such as
company performance, economic conditions, industry trends, and investor sentiment.
Investing in the equity share market can offer the potential for capital appreciation and
dividend income, but it also comes with risks as stock prices can be volatile. It is
important for investors to conduct thorough research, analyse company fundamentals,
and consider their risk tolerance before participating in the equity share market. Many
individuals and institutional investors actively traded stocks, while others opt for long-
term investment strategies by holding stocks over extended periods. The equity share
market plays a crucial role in capital allocation, wealth creation, and economic growth.

Mutual funds: - Mutual funds are investment vehicles that pool money from multiple
investors to invest in a diversified portfolio of securities such as stocks, bonds, and other
assets. They are managed by professional fund managers who make investment
decisions on behalf of the investors. Mutual funds offer a convenient and accessible way
for individuals to invest in a wide range of financial instruments without needing
extensive knowledge or expertise in the markets. They provide diversification, as the
funds spread investments across various assets, sectors, and geographic regions, helping
to mitigate risk. Mutual funds offer different types and categories to cater to various
investor needs and risk profiles, such as equity funds, bond funds, balanced funds, index
funds, and more. They provide investors with the opportunity to participate in the
potential growth of the underlying securities and generate income through dividends or
interest. Mutual funds also offer liquidity, allowing investors to buy or sell their shares
at the current net asset value (NAV) on any business day. However, it's important to
carefully consider the investment objectives, risks, and fees associated with mutual
funds before investing. Conducting thorough research, understanding the fund's
strategy, and considering one's own financial goals and risk tolerance are crucial steps in
making informed investment decisions in mutual funds.
Life insurances: - Life insurance is a financial product that provides a measure of
financial security and protection to individuals and their loved ones in the event of the
policyholder's death. It is a contract between the policyholder and the insurance
company, where the policyholder pays regular premiums, and in return, the insurance
company agrees to pay out a sum of money, known as the death benefit, to the
designated beneficiaries upon the policyholder's death. Life insurance serves as a
financial safety net, providing financial support to the policyholder's dependents,
covering expenses such as funeral costs, mortgage payments, debt repayments,
education expenses, and daily living expenses. There are different types of life
insurance policies available, including term life insurance, whole life insurance, and
universal life insurance, each with its own features and benefits. Life insurance can also
serve as an investment tool, offering the potential to build cash value over time, which
can be accessed through policy loans or withdrawals. It is essential to carefully assess
one's financial needs, consider the coverage amount, and compare policies to choose the
most suitable life insurance policy. Life insurance plays a vital role in providing peace
of mind and financial protection for individuals and their families, ensuring their
financial well-being even in the face of unexpected circumstances.

Corporate Bonds and Debentures: - Corporate bonds and debentures are debt
instruments issued by corporations to raise capital from investors. These instruments
serve as a means for companies to borrow money for various purposes, such as
expanding operations, financing projects, or refinancing existing debt. When an investor
purchases a corporate bond or debenture, they essentially lend money to the issuing
company for a specified period at a predetermined interest rate. Corporate bonds
typically have a fixed maturity date and offer regular interest payments, while
debentures may have more flexible terms. These debt instruments provide investors
with a predictable income stream and relatively lower risk compared to equity
investments. The creditworthiness of the issuing company plays a crucial role in
determining the interest rate offered and the risk associated with the bond or debenture.
Investors can assess the creditworthiness of the company by referring to credit ratings
provided by rating agencies. Corporate bonds and debentures can be bought and sold in
the secondary market, providing liquidity to investors. However, it is important to
carefully consider the credit risk, interest rate risk, and the financial health of the issuing
company before investing in corporate bonds and debentures. These instruments offer
an alternative investment option for individuals seeking fixed income opportunities and
diversification in their investment portfolios.

Real Estate: - Corporate real estate refers to the physical properties and assets owned or
leased by businesses for their operational needs. It includes office buildings,
warehouses, manufacturing facilities, retail spaces, and other types of commercial
properties. Corporate real estate plays a critical role in supporting business operations
and providing a physical infrastructure for employees, customers, and stakeholders.
Companies strategically acquire or lease real estate assets to establish their presence,
facilitate efficient workflow, and enhance productivity. Corporate real estate decisions
are often driven by factors such as location, accessibility, cost, scalability, and the
specific requirements of the business. Additionally, companies may also engage in real
estate investments to generate income through rental returns or property appreciation.
Efficient management of corporate real estate involves activities such as lease
negotiations, property maintenance, space planning, and optimizing space utilization.
Properly managing corporate real estate can contribute to cost savings, brand image
enhancement, and overall organizational performance.

Gold/Silver: - Gold and silver are precious metals that have been valued for centuries
due to their rarity, durability, and aesthetic appeal. They have also served as a store of
value and a form of currency throughout history. Gold and silver are sought after for
various reasons, including jewellery, investment, industrial applications, and hedge
against inflation or economic uncertainty. As investments, gold and silver are often
considered as safe-haven assets due to their ability to retain value during times of
economic volatility. They have a long track record of acting as a hedge against inflation,
as their prices tend to rise when the purchasing power of fiat currencies declines.
Investors can gain exposure to gold and silver through various means, such as physical
bullion, exchange-traded funds (ETFs), futures contracts, and mining company stocks.
However, it's important to note that gold and silver prices can be volatile and subject to
market fluctuations. Additionally, while gold and silver are often viewed as long-term
investments, short-term price movements can be influenced by factors like interest rates,
geopolitical events, and investor sentiment. Individuals considering investing in gold
and silver should carefully assess their investment goals, risk tolerance, and consult with
financial advisors if needed.
Why You Should Invest in Mutual Funds
Comparatively higher Return on Investment (ROI)

One of the main aims of many investors is to achieve a higher rate of return on their
investments to beat inflation and save for future needs. Depending on whether it is a
long or medium-term investment, mutual funds have more prospects of providing higher
returns, as you can invest in a diverse range of industries and sectors. Mutual funds
assist investors in generating higher inflation-adjusted returns, without them having to
put in a lot of effort and time.

Managed by experts

Mutual funds are managed by qualified and experienced fund managers who are skilled
when it comes to making investment decisions based on robust research and expertise.
Managing risks is another crucial consideration while making investment decisions.
Most people don’t have the knowledge and time required for carrying out proper
research and are unable to dedicate all their effort in monitoring markets or economies.
Conversely, the job of a fund manager is to track all such variables and alter their
portfolio to maximise the returns for investors.

Built-in diversification

One significant benefit of mutual funds is that unlike other investment vehicles, mutual
funds assist you in creating a balanced and diversified portfolio. Some portion of the
investment could have equity exposure, which offers long-term growth. Simultaneously,
it could also include fixed income products to manage the risks better. When you’re
investing in equity mutual funds, the same gets spread across various sectors, reducing
the overall risk. Hence, if some stocks do not perform as expected, the outperforming
stocks make up for such losses.

Ease of investing and monitoring

Investors can also start with a minimal amount of Rs. 500 per month through an SIP
(Systematic Investment Plan). Today, there are online platforms that allow investors to
start investing with a few clicks of their smartphones. Additionally, mutual funds not
only offer several modes of investment but also enable investors to choose any amount
that suits them. This makes making systematic investments, accessing account
statements and portfolio details very easy. Investors even have the option to set up
automated bank debits for monthly investments and SIPs, which eliminates the need and
hassle of manually investing every month.

Tax benefits and liquidity

Mutual funds also provide higher liquidity by enabling withdrawals at any point in
time. In such cases, funds are credited back to the bank account of investors as soon as
they choose to redeem it, which means that liquidating these funds does not involve a
long, tedious process. However, this does not apply to closed-ended mutual funds. Apart
from liquidity, mutual funds also offer tax benefits. ELSS (Equity-Linked Saving
Scheme) is one type of diversified equity funds that not only provides an opportunity to
grow investments but also provides tax exemptions u/s 80C of the Income Tax Act,
1961.

The tax treatment on capital gains on the sale of mutual funds is also on the favourable
side for the investor when you invest for longer-terms. The rates for various terms are

Short Term Capital Gains are taxed at 15% on equity mutual funds.

Long-term capital gains from equity funds over Rs 1 lakh per year taxed at 10%
Capital gains arising from debt mutual funds will be taxed as per your income tax slab,
without indexation benefit.

Systematic withdrawal plan

It is a method of withdrawing money from a mutual fund investment in a systematic

manner. For instance, if one has invested Rs. 2.4 lakh in such a scheme, they could set
up a systematic withdrawal plan to withdraw Rs. 20,000 every month for 12 months. It
helps in earning a regular income, which makes it particularly ideal for those who are
retired. This scheme allows scheduled withdrawals of a variable or fixed amount from a
mutual fund scheme at periodic intervals.

One might choose the frequency of withdrawals to be monthly, quarterly, annually or

semi-annually as per their requirements. Cash flows can also be customised, which
makes this a rather convenient investment option. In this way, one could earn a regular
income and at the same time can still stay invested in the scheme.

In India, the SEBI (Securities and Exchange Board of India) regulates mutual funds. In
1996, SEBI framed the Mutual Fund Regulation. Along with SEBI, the Reserve Bank of
India (RBI) and Ministry of Finance also regulate mutual funds. The RBI acts as a
regulator of sponsors for all bank-sponsored mutual funds, particularly in case of funds
that offer guaranteed returns. To provide guaranteed returns, the RBI must approve
mutual fund schemes. The Finance Ministry acts as a supervisor to SEBI and RBI and
appellate authority under regulations of SEBI.

Introduction of Mutual Fund

A mutual fund is an investment fund that pools money from many investors to purchase
securities. The term is typically used in the United States, Canada, and India, while
similar structures across the globe include the SICAV in Europe ('investment company
with variable capital') and open-ended investment company (OEIC) in the UK.

Mutual funds are often classified by their principal investments: money market funds,
bond or fixed income funds, stock or equity funds, or hybrid funds.[1] Funds may also
be categorized as index funds, which are passively managed funds that track the
performance of an index, such as a stock market index or bond market index, or actively
managed funds, which seek to outperform stock market indices but generally charge
higher fees. Primary structures of mutual funds are open-end funds, closed-end funds,
unit investment trusts.

Open-end funds are purchased from or sold to the issuer at the net asset value of each
share as of the close of the trading day in which the order was placed, as long as the
order was placed within a specified period before the close of trading. They can be
traded directly with the issuer.

Mutual funds have advantages and disadvantages compared to direct investing in

individual securities. The advantages of mutual funds include economies of scale,
diversification, liquidity, and professional management.[3] However, these come with
mutual fund fees and expenses.
Mutual funds are regulated by governmental bodies and are required to publish
information including performance, comparison of performance to benchmarks, fees
charged, and securities held. A single mutual fund may have several share classes by
which larger investors pay lower fees.

Hedge funds and exchange-traded funds are not mutual funds, and each is targeted at
different investors, with hedge funds being available only to high-net-worth individuals.

HOW DOES A MUTUAL FUND WORKS

The Fund Sponsor

Sponsor is defined under SEBI regulations as any person who, acting alone or in
combination
of another corporate body establishes a Mutual Fund. The sponsor of the fund is akin to
the
promoter of a company as he gets the fund registered with SEBI. The sponsor forms a
trust and
appoints a Board of Trustees. The sponsor also appoints the Asset Management
Company as
fund managers. The sponsor either directly or acting through the trustees will also
appoint a
custodian to hold funds assets. All these are made in accordance with the regulation and
guidelines of SEBI.
As per the SEBI regulations, for the person to qualify as a sponsor, he must contribute at
least40% of the net worth of the Asset Management Company and possesses a sound
financial
track record over 5 years prior to registration.
Mutual Funds as Trusts
A Mutual Fund in India is constituted in the form of Public trust Act, 1882. The Fund
sponsor
acts as a settlor of the Trust, contributing to its initial capital and appoints a trustee to
hold the
assets of the trust for the benefit of the unit-holders, who are the beneficiaries of the
trust. The
fund then invites investors to contribute their money in common pool, by scribing to
“units”
issued by various schemes established by the Trusts as evidence of their beneficial
interest in
the fund.
It should be understood that the fund should be just a “pass through” vehicle. Under the
Indian Trusts Act, the trust of the fund has no independent legal capacity itself, rather it
is
G.S COLLEGE OF COMMERCE AND ECONOMICS
37
SAKSHI GANDHI
The Trustee or the Trustees who have the legal capacity and therefore all acts in relation
to the
trusts are taken on its behalf by the Trustees. In legal parlance the investors or the unit-
holders
are the beneficial owners of the investment held by the Trusts, even as these investments
are
held in the name of the Trustees on a day-to-day basis. Being public trusts, Mutual Fund
can
invite any number of investors as beneficial owners in their investment schemes.
Trustees
A Trust is created through a document called the Trust Deed that is executed by the fund
sponsor in favour of the trustees. The Trust- the Mutual Fund – may be managed by a
board
of trustees- a body of individuals, or a trust company- a corporate body. Most of the
funds in
India are managed by Boards of Trustees. While the boards of trustees are governed by
the
Indian Trusts Act, where the trusts are a corporate body, it would also require to comply
with
the Companies Act, 1956. The Board or the Trust company as an independent body, acts
as a
protector of the of the unit-holders interests. The Trustees do not directly manage the
portfolio
of securities. For this specialist function, the appoint an Asset Management Company.
They
ensure that the Fund is managed by AMC as per the defined objectives and in
accordance with
the trusts deed sand SEBI regulations.
The Asset Management Companies
The role of an Asset Management Company (AMC) is to act as the investment manager
of the Trust under the board supervision and the guidance of the Trustees. The AMC is
required to be approved and registered with SEBI as an AMC. The AMC of a Mutual
Fund must have a net worth of at least Rs. 10 Crores at all times. Directors of the AMC,
both independent and non-independent, should have adequate professional expertise in
financial services and should be individuals of high morale standing, a condition also
applicable to other key personnel of the AMC. The AMC cannot act as a Trustee of any
other Mutual Fund. Besides its role as a fund manager, it may undertake specified
activities such as advisory services and financial consulting, provided these activities
are run independent of one another and the AMC’s resources (such as personnel,
systems etc.) are properly segregated by the activity. The AMC must always act in the
interest of the unit-holders and reports to the trustees with respect to its activities.
Custodian and Depositories
Mutual Fund is in the business of buying and selling of securities in large volumes.
Handling these securities in terms of physical delivery and eventual safekeeping is a
specialized activity. The custodian is appointed by the Board of Trustees for safekeeping
of securities or participating in any clearance system through approved depository
companies on behalf of the Mutual Fund and it must fulfil its responsibilities in
accordance with its agreement with the Mutual Fund. The custodian should be an entity
independent of the sponsors and is required to be registered with SEBI. With the
introduction of the concept of dematerialization of shares the dematerialized shares are
kept with the Depository participant while the custodian holds the physical securities.
Thus, deliveries of a fund’s securities are given or received by a custodian ora
depository participant, at the instructions of the AMC, although under the overall
direction and responsibilities of the Trustees.

Bankers
A Fund’s activities involve dealing in money on a continuous basis primarily with
respect to buying and selling units, paying for investment made, receiving the proceeds
from sale of the investments, and discharging its obligations towards operating
expenses. Thus the Fund’s banker plays an important role to determine quality of
service that the fund gives in timely delivery of remittances etc.

Transfer Agents

Transfer agents are responsible for issuing and redeeming units of the Mutual Fund and
provide other related services such as preparation of transfer documents and updating
investor records. A fund may choose to carry out its activity in-house and charge the
scheme for the service at a competitive market rate. Where an outside Transfer agent is
used, the fund investor will find the agent to be an important interface to deal with,
since all of the investor services that a fund provides are going to be dependent on the
transfer agent.

TYPES OF MUTUAL FUND SCHEMES

The mutual fund industry is continuously emerging. Several industrial bodies are also
investing in investor education. Yet, according to a report by Boston Analytics, less than
10% of our households do not consider mutual funds as an investment avenue.
In fact, a basic inquiry about the types of mutual fund reveals that these are perhaps one
of the most flexible, comprehensive and hassle-free modes of investments, that can
accommodate various types of investment needs.

Various types of mutual fund categories are designed to allow investors to choose a
scheme based on the risk they are willing to take, the investable amount, their goals, the
investment term, etc.

Schemes Based on the Maturity Period

Types of mutual fund schemes based on the maturity period are as follows-

1. Open Ended Funds

2. Close Ended Funds
3. Interval Funds

Open Ended Scheme

This scheme allows investors to buy or sell units at any point in time. It does not have a
fixed maturity date either. You deal directly with the Mutual Fund for your investment
and redemption.

The key feature is liquidity. You can conveniently buy or sell your units at net asset
value (“NAV”) related prices. The majority of mutual funds, 59% approximately are
open-end funds.

Close Ended Scheme

This type of scheme has a stipulated maturity period and investors can invest only
during the initial launch period known as the New Fund Offer (NFO).

Once the offer closes, no new investments are permitted. The market price at the stock
exchange could vary from the scheme’s Net Asset Value (NAV), because of the demand
and supply situation, unit holder’s expectations and other market factors.

Some close ended schemes will give you an additional option of selling your units
directly to the mutual funds through periodic repurchase at NAV related prices.
SEBI Regulations ensure that at least one of the two exit routes are provided to the
investor.

Interval

It operates as a combination of open and closed ended scheme, it allows investors to

trade units at predefined intervals. They may be traded on the stock exchange or they
may even be open for sale or redemption during pre-determined intervals at NAV
related prices.

When it comes to selecting a scheme to invest in, one should look for customized
advice. Choose the scheme that provides the right combination of growth, stability and
income, keeping your risk appetite in mind.

Based on Principal Investments

One of the most important points in the circular is that different types of Mutual Funds
schemes should be clearly distinct in terms of investment strategy and asset allocation.
The schemes will be broadly classified into following categories

1. Equity Schemes
2. Debt Schemes
3. Hybrid Schemes
4. Solution Oriented Schemes
5. Other Schemes

The existing type of scheme would be replaced with the new type of schemes. Let’s
look at each type of scheme

Equity Schemes

SEBI has decided total 11 categories under Equity Schemes but a mutual fund company
can only have 10 categories and it has to choose between Value or Contra. Still 10
categories looks bit high but I think its fair considering the possible variations in the
startegy. To make this easier SEBI has also defined meaning of Large Cap, Mid Cap and
Small Cap.

Large Cap: Top 100 companies in terms of market capitalization

Large Cap: 101st- 250th companies in term of market capitalization

Small Cap: 251st company onwards in terms of market capitalization

HISTORY OF MUTUAL FUNDS IN INDIA

A strong financial market with broad participation is essential for a developed economy.
With this broad objective India’s first mutual fund was establishment in 1963, namely,
Unit Trust of India (UTI), at the initiative of the Government of India and Reserve Bank
of India ‘with a view to encouraging saving and investment and participation in the
income, profits and gains accruing to the Corporation from the acquisition, holding,
management and disposal of securities.

In the last few years the MF Industry has grown significantly. The history of Mutual
Funds in India can be broadly divided into five distinct phases as follows:

FIRST PHASE – 1964-1986

The Mutual Fund industry in India started in 1963 with formation of UTI in 1963 by an
Act of Parliament and functioned under the Regulatory and administrative control of the
Reserve Bank of India (RBI). In 1978, UTI was de-linked from the RBI and the
Industrial Development Bank of India (IDBI) took over the regulatory and
administrative control in place of RBI. Unit Scheme 1964 (US ’64) was the first scheme
launched by UTI. At the end of 1988, UTI had ₹ 6,700 crores of Assets Under
Management (AUM).

SECOND PHASE – 1987-19923 ENTRY OF PUBLIC SECTOR MUTUAL FUND

The year 1987 marked the entry of 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. 1987), Punjab National Bank
Mutual Fund (Aug. 1989), Indian Bank Mutual Fund (Nov 1989), Bank of India (Jun
1990), Bank of Baroda Mutual Fund (Oct. 1992). 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 MF industry had assets under management of ₹47,004 crores.

THIRD PHASE – 1993 – 2003 ENTRY OF PRIVET SECTOR MUTUAL FUND

The Indian securities market gained greater importance with the establishment of SEBI
in April 1992 to protect the interests of the investors in securities market and to promote
the development of, and to regulate, the securities market.

In the year 1993, the first set of SEBI Mutual Fund Regulations came into being for all
mutual funds, except UTI. The erstwhile Kothari Pioneer (now merged with Franklin
Templeton MF) was the first private sector MF registered in July 1993. With the entry
of private sector funds in 1993, a new era began in the Indian MF industry, giving the
Indian investors a wider choice of MF products. The initial SEBI MF Regulations were
revised and replaced in 1996 with a comprehensive set of regulations, viz., SEBI
(Mutual Fund) Regulations, 1996 which is currently applicable.

The number of MFs increased over the years, with many foreign sponsors setting up
mutual funds in India. Also, the MF industry witnessed several mergers and acquisitions
during this phase. As at the end of January 2003, there were 33 MFs with total AUM of
₹1,21,805 crores, out of which UTI alone had AUM of ₹44,541 crores.

FOURTH PHASE SINCE FEBRUARY 2004 – APRIL 2014

In February 2003, following the repeal of the Unit Trust of India Act 1963, UTI was
bifurcated into two separate entities, viz., the Specified Undertaking of the Unit Trust of
India (SUUTI) and UTI Mutual Fund which functions under the SEBI MF Regulations.
With the bifurcation of the erstwhile UTI and several mergers taking place among
different private sector funds, the MF industry entered its fourth phase of consolidation.

Following the global melt-down in the year 2009, securities markets all over the world
had tanked and so was the case in India. Most investors who had entered the capital
market during the peak, had lost money and their faith in MF products was shaken
greatly. The abolition of Entry Load by SEBI, coupled with the after-effects of the
global financial crisis, deepened the adverse impact on the Indian MF Industry, which
struggled to recover and remodel itself for over two years, in an attempt to maintain its
economic viability which is evident from the sluggish growth in MF Industry AUM
between 2010 to 2013.

 FIFTH(CURRENT) PHASE SINCE MAY2014

Taking cognisance of the lack of penetration of MFs, especially in tier II and tier III
cities, and the need for greater alignment of the interest of various stakeholders, SEBI
introduced several progressive measures in September 2012 to "re-energize" the Indian
Mutual Fund industry and increase MFs’ penetration.

In due course, the measures did succeed in reversing the negative trend that had set in
after the global melt-down and improved significantly after the new Government was
formed at the Centre.

Since May 2014, the Industry has witnessed steady inflows and increase in the AUM as
well as the number of investor folios (accounts).

 The Industry’s AUM crossed the milestone of ₹10 Trillion ( ₹10 Lakh Crore) for
the first time as on 31st May 2014 and in a short span of about three years the
AUM size had increased more than two folds and crossed ₹ 20 trillion ( ₹20
Lakh Crore) for the first time in August 2017. The AUM size crossed ₹ 30
trillion (₹30 Lakh Crore) for the first time in November 2020.

 The overall size of the Indian MF Industry has grown from ₹ 8.26 trillion as on
30th April 2013 to ₹ 41.62 trillion as on 30th April 2023, more than 5 fold
increase in a span of 10 years.

 The MF Industry’s AUM has grown from ₹ 23.26 trillion as on April 30, 2018 to
₹41.62 trillion as on April 30, 2023, around 2 fold increase in a span of 5 years.

 The no. of investor folios has gone up from 7.22 crore folios as on 30-Apr-2018
to 14.64 crore as on 30-Apr-2023, more than 2 fold increase in a span of 5 years.

 On an average 12.37 lakh new folios are added every month in the last 5 years
since April 2018.
The growth in the size of the industry has been possible due to the twin effects of the
regulatory measures taken by SEBI in re-energising the MF Industry in September 2012
and the support from mutual fund distributors in expanding the retail base.

MF Distributors have been providing the much needed last mile connect with investors,
particularly in smaller towns and th is is not limited to just enabling investors to invest
in appropriate schemes, but also in helping investors stay on course through bouts of
market volatility and thus experience the benefit of investing in mutual funds.

MF distributors have also had a major role in popularising Systematic Investment Plans
(SIP) over the years. In April 2016, the no. of SIP accounts has crossed 1 crore mark
and as on 30th April 2023 the total no. of SIP Accounts are 6.42 crore.

How to Select the Top Performing Mutual funds in India

We all want to know the best mutual funds to invest now. This section will highlight
some of the factors that can help you identify the top 10 best mutual funds to invest in
today.

Investment Objectives

You should undertake any investment only after a thorough examination of your life
goals. Once you’ve determined your needs, you’ll need to compare them to the
objectives of a mutual fund scheme to see if investing in them would help you to
achieve your financial goals. Mutual funds, like individuals, have specific investment
objectives, and it is up to the investors to determine whether their goals align with the
mutual fund scheme in which they will invest.

For example, one of the objectives of equity mutual funds is wealth creation. So, equity
mutual funds are best for investors looking at long-term wealth creation to achieve long-
term goals like building a retirement corpus. In this case, investing predominately in
equity funds would be a better option than investing in debt funds, as equities have the
potential to generate higher returns than debt funds. So, if you invest chiefly in debt
funds to build a retirement corpus, you won't accumulate the same retirement corpus as
you could with equity funds.

As a result, to make a meaningful selection, the fund’s investment objective must align
with an investor’s goals, and risk tolerance.
Equity funds are the best mutual funds to invest in for the long term. Opt for a growth
mutual fund option to easily reach your long-term goals, as the fund’s returns will
compound over time.

In the scheme information document, you will find all the relevant details, such as the
asset allocation and objectives.

 Fund’s History

The fund’s history provides a record of the fund’s performance over time, including
times of rising and corrections in markets. This shows the fund’s resilience during
volatile market conditions.

Recently launched mutual funds and funds that are open for subscription don’t have a
track record so it becomes difficult to predict their returns and their performance across
the different market cycles. The best MF to invest in is a fund with a long track record
of delivering consistent returns over the different market cycles. It also demonstrates the
proof of well-researched investment strategies.

 Expense Ratio

The fund house charges fund management fees along with other charges for managing
the assets of a fund, which is the expense ratio and is represented as a percentage of the
fund’s asset. The mutual fund returns generated minus the expense ratio will be the net
return earned by the investor. An investor’s returns will be lower if the expense ratio is
high. As a result, an investor should look for a scheme with a lower expense ratio than
its peers in the category while choosing a fund.

 Fund Manager’s Performance

The fund manager is in charge of managing the fund. It’s crucial to look at the fund
manager’s track record.

An investor should monitor the fund’s performance during times of rise and corrections
in the market. They can also look at the performance of the different schemes managed
by the fund manager.

 Check the consistency of the fund

Top performing mutual funds in India have a proven track record of outperforming the
market over the long term, typically three to five years. These funds would have
outperformed their benchmark and peer funds in terms of performance. You must
examine the fund’s performance across the previous several business cycles. Examine
the fund’s performance during market downturns, in particular. Market fluctuations have
a lower than average impact on the performance of a top-performing fund. However,
that past performance does not guarantee future results.

Additionally, you can also check the historical NAV of Mutual Funds and the latest
NAV of Mutual Funds to understand the past track record of the mutual fund.

 Check the financial ratios

You can evaluate financial ratios such as alpha and beta to identify India’s top-
performing mutual funds.

Mutual fund returns and risk are inextricably linked. The increase in the overall value of
the capital invested is referred to as a return. Risk is defined as the uncertainty
surrounding an investment, and it refers to the possibility of obtaining no or negative
returns for a variety of causes. As a result, any investor must evaluate the risk-return
potential, and financial ratios have made this risk-return analysis possible.

The Sharpe and Alpha ratios provide crucial data. The Sharpe ratio measures the fund’s
excess return on every unit of risk it has taken. As a result, funds with a higher Sharpe
ratio are seen as superior to funds with a lower Sharpe ratio. The additional mutual fund
returns earned by the fund manager over the benchmark is called alpha. Funds having a
higher Alpha are seen to be superior.

which mutual fund sector is best for invest

As an AI language model, I can provide general information, but it's important to note
that choosing the best mutual fund sector for investment depends on various factors,
including your financial goals, risk tolerance, investment horizon, and market
conditions. Additionally, I should mention that I can't provide real-time data or
personalized financial advice.

Here are some popular mutual fund sectors that investors often consider:
 1. Equity Funds: These funds invest in stocks and are suitable for long-term
growth. They can be further categorized based on market capitalization (large-
cap, mid-cap, small-cap) or investment style (value, growth, blend).
2. Bond Funds: These funds invest in fixed-income securities such as government
or corporate bonds. They are typically considered lower risk compared to equity
funds and can provide regular income.
3. Balanced Funds: Also known as hybrid funds, these invest in a combination of
stocks and bonds, aiming for a balance between growth and income. They can
be categorized based on their asset allocation, such as aggressive balanced,
conservative balanced, or moderate balanced.
4. Sector-specific Funds: These funds focus on specific sectors or industries, such
as technology, healthcare, energy, or real estate. Investing in sector funds can be
more volatile as they are influenced by the performance of a particular sector.
5. Index Funds: These funds aim to replicate the performance of a specific market
index, such as the S&P 500. They offer broad market exposure at a relatively
low cost and are popular among passive investors.

It is crucial to conduct thorough research, evaluate the fund's historical performance,

expense ratios, fund manager's track record, and read the fund prospectus before making
any investment decisions. It is also recommended to consult with a financial advisor
who can provide personalized guidance based on your specific circumstances and goals.