Comparison between Investment in Equity and Mutual Fundes



Mutual Funds are essentially investment vehicles where people with similar investment objective come together to pool their money and then invest accordingly. Each unit of any scheme represents the proportion of pool owned by the unit holder (investor). Appreciation or reduction in value of investments is reflected in net asset value (NAV) of the concerned scheme, which is declared by the fund from time to time. Mutual fund schemes are managed by respective Asset Management Companies (AMC). Different business groups/ financial institutions/ banks have sponsored these AMCs, either alone or in collaboration with reputed international firms. Several international funds like Alliance and Templeton are also operating independently in India . Many more international Mutual Fund giants are expected to come into Indian markets in the near future.

A mutual fund is the ideal investment vehicle for today's complex and modern financial scenario. Markets for equity shares, bonds and other fixed income instruments, real estate, derivatives and other assets have become mature and information driven. Price changes in these assets are driven by global events occurring in faraway places. A typical individual is unlikely to have the knowledge, skills, inclination and time to keep track of events, understand their implications and act speedily. An individual also finds it difficult to keep track of ownership of his assets, investments, brokerage dues and bank transactions etc.

Investing in Mutual Fund is convenient because of two basic reasons. All investment carry risks, especially equity investment that bears larger risks, their returns are more volatile and uneven. To cut down the risk one needs to put money in several instruments rather than in one or two products. A Mutual Fund can effectively spread its investments across various sectors of the economy and amongst several products. Risk diversification is the Key. Secondly 'where to invest and where not to', is a specialized business. One may not have the expertise, time and resources of a well-managed fund.


The research was conducted to find out about the preference of the target population for Equity Diversified Mutual Funds and Direct Equity. Besides this the research was conducted to know about reasons for preferring mutual funds and direct equity funds.

The target population mainly included service class people. Hence convenient sampling was used in deciding on the target population.

First an exploratory research was conducted to get some insights about the topic. Secondary data analysis was performed. It was followed by questionnaire filling. Findings of the exploratory research were regarded as input to further research. This research will be followed by descriptive design.

Secondary Data

Secondary data was collected from various sources such as internet and financial magazines.

Primary Data

In Primary data, structured questionnaire was made and the target respondents were asked to fill the questionnaire.

Questionnaire Design

Objective was to make respondents little familiar with the context of the questions. This was also aimed at collecting data about the sample profile that'll be subsequently analyzed so that the scope of the project is fully explored.

Question 1 was aimed to check the awareness level of the respondent about various investment avenues.

Question 2 was an open ended question intended to find out some more factors which people consider important while investing.

Question 3 was aimed to understand the most preferred mode of investment.

Question 4 was designed to understand the types of mutual fund where people have invested.

Question 5 was designed to understand the importance of past returns in making decisions about various investment schemes.

Question 6 was designed to understand if returns were the only criteria for evaluating the performance.

Question 7 was designed to understand the approach of people in making investment.

Question 8 was designed to find out what factors are considered important by people who invest different investments.

Question 9 was formulated to know the period of portfolio review done by people.

Question 10 was put to find out the long term and short term investors.

Question 11 was asked to find out how actively investors change their portfolio.

Question 12 was asked to compare the equity diversified mutual funds and direct equity.

Question 13 & 15 were asked to judge the factors why people prefer to invest in Mutual Funds and Direct Equity.

Question 14 was asked to find out the availability of information sources for various schemes.

For the purpose of primary data collection the target population was administered with a questionnaire which had both structured as well as unstructured questions.

Selection of equity diversified funds are done here on the basis of their Return, risk , liquidity, affordability, entry-exit load, and performance over the years. Also,

•  Only open ended funds are considered while choosing best equity related mutual funds.

•  Among growth and dividend schemes, only growth scheme has been taken so as to avoid repetition (as portfolio remains same for both the options)

Selection has been done on the basis of last 1 year performance.

Equity shares

These are shares of company and can be traded in secondary market. Investors get benefit by change in price of share or dividend given by companies. Equity shares represent ownership capital. As an equity shareholder, a person has an ownership stake in the company. This essentially means that the person has a residual interest in income and wealth of the company. These can be classified into following broad categories as per stock market:

•  Blue chip shares - Shares of large, well established, financially strong companies with an impressive record of earnings and dividends.

•  Growth shares -Shares of companies that have fairly entrenched positions in a growing market and which enjoy an above average rate of growth as well as profitability.

•  Income shares -Share of companies that have fairly stable operations, relative limited growth opportunities, and high dividend payout ratios.

•  Cyclic shares - Share of companies that have a pronounced cyclicality in their operations.

•  Defensive shares- Shares of companies that are relatively unaffected by the ups and downs in general business conditions.

Speculative shares- Shares of companies that tend to fluctuate widely because there is a lot of speculative trading in them.

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