In the current economic scenario interest rates are falling and fluctuation in the share market has put investors in confusion. One finds it difficult to take decision on investment. This is primarily, because of investments are risky in nature and investors have to consider various factors before investing in investment avenues.These factors include risk, return, volatility of shares and liquidity. The main objective of comparing investment in equity shares with mutual fund schemes is to analyze the performance of mutual funds with their benchmark and comparing them with equities by using risk, return, beta and alpha as a parameter.
Historical data were taken for calculating risk, return, alpha and beta. Analysis has done on percentage method for comparing equity shares with mutual fund schemes. Compare to equities mutual funds are less risky with stable returns and mutual funds gives the investor a diversified portfolio. Those who have well knowledge in equity market they can go for equity investments rather than investing in mutual funds because no control on the expenses made by the fund manager.
The study will guide the new investor who wants to invest in equity and mutual fund schemes by providing knowledge about how to measure the risk and return of particular scrip or mutual fund scheme. The study recommends new investors to go for mutual funds rather than equities, because of high risk and market instability.
In the current economic scenario interest rates are falling and fluctuation in the share market has put investors in confusion. One finds it difficult to take decision on investment. This is primarily, because investments are risky in nature and investors have to consider various factors before investing in investment avenues. Therefore the study aims to compare equity and mutual fund schemes in form their risk, return & liquidity and also creating awareness about Equity and Mutual Fund Schemes among the investors.
Saving money is not enough. Each of us also need to invest one’s savings intelligently in order to have enough money available for funding the higher education of one’s children, for buying a house, or for one’s own golden years. But the rapidly growing number of investment avenues often led to confusion. Objectives of the study are to provide information to individual investors regarding their risk, and choosing the best investment options to match their goals and attitude to risk.
1. To compare Equity and Mutual Fund Schemes in respect of their risk & return.
2. Analyzing the performance of equity shares and mutual fund schemes with their benchmark.
3. Finding the Volatility of shares by using beta.
4. Provide information about pros and cons of investing in Equity and Mutual Funds portfolio management.
The study is limited to compare equity capital and mutual fund schemes in respect of their risk, return and liquidity. The study covers 5 randomly selected stocks out of 30 BSE, 50 Sensex companies and 5 randomly selected mutual fund schemes out of mutual fund industry in India for comparison. The analysis is strictly based on share price and unit price information. Other company performance indicators are not considered. It focuses on every month ending closing prices of during the period from 1st Apr, 2003 to 31st Mar, 2007.
The whole study can be termed as comparative study. It is also a desk research hence; there is no field work and collection of primary date for this research.
The study centres on comparing equity and mutual fund schemes in respect of their risk, return and liquidity. However, with the objective and scope of the study in mind, it was decided to base the study on return series of selected stocks and mutual fund schemes.
BSE being the premier exchange of India was chosen for selecting stocks. It is widely accepted that BSE Sensex is the one of the most reliable index of the stock exchange that reflects present day market condition. Since it is not possible to compare all the 30 scripts in the index with all Mutual Fund Schemes due to time and resource constraints, sampling techniques were considered. Randomly selected samples will facilitate inference of the population, in our case BSE Sensex and mutual fund industry in India. Hence by stratified random sampling 5 scrip’s out of 30 Sensex and 5 mutual fund schemes out of whole mutual fund industry were selected.
The initial examination of the composition of index revealed that it is composed of primarily two types of industries: manufacturing and services in the ratio of 3:2. there for to give correct picture appropriate weight was assigned to manufacturing industries and hence three scrip’s from manufacturing and two from service industries were randomly selected and in case of mutual funds it consists basically large cap, mid cap, small cap, sectorial funds and contra funds therefore one fund from each area were selected.
Monthly share price and unit prices of the selected scrip’s and units were collected from historical data. In order to avoid bias, at least three years monthly data was decided to be necessary. The reference period is from 1st Apr, 2003 to 31st Mar, 2007.
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