Mutual Funds Or Etf's.docx

“MUTUAL FUNDS OR ETF’s”

A report submitted in partial fulfillment of PGDM Programme 2017-2019

Submitted By: -

Faculty Guide:-

Ayushi Jain

Prof. Indira Bharadwaj

PGDM 2nd year 201705058

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DECLARATION I hereby declare that this project report “Mutual Funds or ETF’s”is my own work, to the best of my knowledge and belief. It contains no material previously published or written by another person nor material which to a substantial extent has been accepted for the award of any other degree or diploma of any other institute, except where due acknowledge has been made in the text. Signature: ____________________ Name- Ayushi Jain Roll no. 201705058 2017-2019 Date:- _______________

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ACKNOWLEDGEMENT I would like to thank my mentor and professors at Delhi School of Business, for their guidance and constant supervision as well as for providing necessary information regarding the project & also for their support in completing the project. I am sincerely grateful to them for sharing their truthful and illuminating views throughout my Masters course. I express my sincere thanks to my mentor Prof. Indira Bharadwaj for kind cooperation and encouragement which help me in completion of this project. My thanks and appreciations also go to my colleagues in developing the project and people who have willingly helped me out with their abilities

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Table Of Contents Chapter no.1 1 2 3 4

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6 7 8

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Topic Summary Introduction to Mutual Funds Introduction to ETF’s Performance of ETF’s in recent years The case of ETF’s in three charts Data Analysis Findings Recommendatio ns and Conclsions Questionnaire References

Page No. 5 7 12 18

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24 29 30

31 34

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SUMMARY Exchange-traded funds (ETFs) are increasingly finding favour in the global financial markets; foreign institutional investors (FIIs) in particular are using ETFs to gain exposure to emerging markets. In India, ETFs are making their presence felt gradually. In fact, ETFs are one of the disinvestment modes proposed by the Indian government for public sector undertakings (PSUs). After liberalisation in 1991, FIIs have played a significant role in the Indian stock market. It has been estimated that a sizable chunk of FII flows comes through offshore and Indiafocused equity funds and ETFs. Exchange-traded funds are one of the best known innovations in financial markets. ETFs hold assets such as stocks, commodities, or bonds, and trade close to their net asset value (NAV) throughout the day. ETFs can track a specific index, a particular sector of an industry, or even the stock markets of a foreign country. ETFs that are passively managed and track their benchmark indices are known as classical ETFs. ETFs combine the positive aspects of closed-ended and open-ended mutual funds. ETFs have several advantages over traditional mutual funds, such as lower expense ratios, trading flexibility, tax efficiency, transparency, and exposure to diverse asset classes. Mutual funds have higher expense ratios than ETFs because of entry and exit loads. It is pertinent to note that in India, entry loads for mutual funds have been banned while exit loads do exist. ETFs can be traded like stocks throughout the day while open-ended mutual funds can be accessed only at the end of the day The heightened market volatility in 2018 took a toll on the performance of large cap schemes as exchange-traded funds—which track an index, a commodity, bonds, or a basket of assets—managed to beat “actively managed funds” by providing superior returns to investors during the year. ETFs are managed passively and provide returns very similar to that of its underlying index. There is a certain section of people who believes that ETF’s are a strong alternative to large cap funds. Also people are more comfortable in investing mutual funds. An awareness needs to be created for ETF’s.

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Objective of the study i. ii. iii. iv.

To understand the perception of people in terms of investing in the mutual funds or ETF’s. To measure and compare the performance of mutual funds and ETF’s. To analyze the trends of returns of mutual funds and ETF’s. To study the profile, attitude and preferences through a questionnaire.

Limitations of the study There are three major limitations in this study that could be addressed in future research. First, the sample size was limited due to exact perception required in the study was not received in the questionnaire. Second there was no sufficient sample size in order to conclude a valid research valid. Third, limited access to data.

Research and Methodology  Mail Questionnaire. This sort of questionnaires involves the researcher to send the questionnaire list to respondents through post, often attaching prepaid envelope. Mail questionnaires have an advantage of providing more accurate answer, because respondents can answer the questionnaire in their spare time. The disadvantages associated with mail questionnaires include them being expensive, time consuming and sometimes they end up in the bin put by respondents.  Data source. This study is based on primary and secondary data. i. Primary data has been collected through questionnaire. ii. Secondary data has been collected through websites In addition to the above, different articles and opinions of fund managers have been collected from the magazines like Capital Market, Chartered Financial Analyst and Mutual Fund Insight.  Data Analysis. The data collected from various sources have been analyzed by using different techniques as bar diagrams and graphs are widely used.

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Mutual Funds A mutual fund collects money from investors and invests the money on their behalf. It charges a small fee for managing the money. Mutual funds are an ideal investment vehicle for regular investors who do not know much about investing. Investors can choose a mutual fund scheme based on their financial goal and start investing to achieve the goal. Mutual Funds are registered with SEBI (Securities and Exchange Board of India) that regulates security markets prior to the collection of the funds from the investors. Investing in a Mutual Funds can be simple buying or selling stocks or bonds online. Moreover, investors can sell out their shares whenever they want or need. By law, each mutual fund is required to file a prospectus and regular shareholder reports with the SEC. Before you invest, be sure to read the prospectus and the required shareholder reports. Additionally, the investment portfolios of mutual funds are managed by separate entities known as “investment advisers” that are registered with the SEC. Always check that the investment adviser is registered before investing. Risk and Return Relationship Risk/Return Tradeoff is all about achieving the fine balance between lowest possible risk and highest possible return. Low levels of risk are usually associated with low potential returns while higher levels of risk are normally expected to yield higher returns. The graph below depicts the typical risk / return relationship.

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Types of funds Most mutual funds fall into one of four main categories – money market funds, bond funds, stock funds, and target date funds. Each type has different features, risks, and rewards.  Money market funds have relatively low risks. By law, they can invest only in certain high-quality, short-term investments issued by U.S. corporations, and federal, state and local governments.  Bond funds have higher risks than money market funds because they typically aim to produce higher returns. Because there are many different types of bonds, the risks and rewards of bond funds can vary dramatically.  Stock funds invest in corporate stocks. Not all stock funds are the same. Some examples are:  Growth funds focus on stocks that may not pay a regular dividend but have potential for above-average financial gains.  Income funds invest in stocks that pay regular dividends.  Index funds track a particular market index such as the Standard & Poor’s 500 Index.  Sector funds specialize in a particular industry segment.  Target date funds hold a mix of stocks, bonds, and other investments. Over time, the mix gradually shifts according to the fund’s strategy. Target date funds, sometimes known as lifecycle funds, are designed for individuals with particular retirement dates in mind.

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Advantages of Mutual fund

a. Liquidity Unless you opt for close-ended mutual funds, it is relatively easier to buy and exit a scheme. You can sell your units at any point (when the market is high). Do keep an eye on surprises like exit load or pre-exit penalty. Remember, mutual fund transactions happen only once a day after the fund house releases that day’s NAV. b. Diversification Mutual funds have their own share of risks as their performance is based on the market movement. Hence, the fund manager always invests in more than one asset class (equities, debts, money market instruments etc.) to spread the risks. It is called diversification. This way, when one asset class doesn’t perform, the other can compensate with higher returns to avoid the loss for investors. c. Expert Management Mutual fund is favored because it doesn’t require the investors to do the research and asset allocation. A fund manager takes care of it all and makes decisions on what to do with your investment. He/she decides whether to invest in equities or debt. He/she also decide on whether to hold them or not and for how long.

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Your fund manager’s reputation in fund management should be an important criterion for you to choose a mutual fund for this reason. The expense ratio (which cannot be more than 1.05% of the AUM guidelines as per SEBI) includes the fee of the manager too. d. Less cost for bulk transactions You must have noticed how price drops with increased volume, when you buy any product. For instance, if a 100g toothpaste costs Rs.10, you might get a 500g pack for, say, Rs.40. The same logic applies to mutual fund units as well. If you buy multiple units at a time, the processing fees and other commission charges will be less compared to when you buy one unit. e. Invest in smaller denominations By investing in smaller denominations (SIP), you get exposure to the entire stock (or any other asset class). This reduces the average transactional expenses – you benefit from the market lows and highs. Regular (monthly or quarterly) investments as opposed to lump sum investments give you the benefit of rupeecost averaging. f. Suit your financial goals There are several types of mutual funds available in India catering to investors from all walks of life. No matter what your income is, you must make it a habit to set aside some amount (however small) towards investments. It is easy to find a mutual fund that matches your income, expenditures, investment goals and risk appetite. g. Cost-efficiency You have the option to pick zero-load mutual funds with less expense ratios. You can check the expense ratio of different mutual funds and choose one that fits in your budget and financial goals. Expense ratio is the fee for managing your fund. It is a useful tool to assess a mutual fund’s performance.

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Disadvantages of Mutual Funds

a. Costs to manage the mutual fund The salary of the market analysts and fund manager basically comes from the investors. Total fund management charge is one of the main parameters to consider when choosing a mutual fund. Greater management fees do not guarantee better fund performance. b. Lock-in periods Many mutual funds have long-term lock-in periods, ranging from 5 to 8 years. Exiting such funds before maturity can be an expensive affair. A certain portion of the fund is always kept in cash to pay out an investor who wants to exit the fund. This portion in cash cannot earn interest for investors. c. Dilution While diversification averages your risks of loss, it can also dilute your profits. Hence, you should not invest in more than 7-9 mutual funds at a time.

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Exchange Traded Funds (ETF’s) Exchange Traded Funds are essentially Index Funds that are listed and traded on exchanges like stocks. Until the development of ETFs, this was not possible before. Globally, ETFs have opened a whole new panorama of investment opportunities to Retail as well as Institutional Money Managers. They enable investors to gain broad exposure to entire stock markets in different Countries and specific sectors with relative ease, on a real-time basis and at a lower cost than many other forms of investing. An ETF is a basket of stocks that reflects the composition of an Index, like S&P CNX Nifty or BSE Sensex. The ETFs trading value is based on the net asset value of the underlying stocks that it represents. Think of it as a Mutual Fund that you can buy and sell in real-time at a price that change throughout the day. An ETF combines the valuation feature of a mutual fund or unit investment trust, which can be bought or sold at the end of each trading day for its net asset value, with the tradability feature of a closed-end fund, which trades throughout the trading day at prices that may be more or less than its net asset value. Closed-end funds are not considered to be ETFs, even though they are funds and are traded on an exchange. ETFs have been available in the US since 1993 and in Europe since 1999. ETFs traditionally have been index funds, but in 2008 the U.S. Securities and Exchange Commission began to authorize the creation of actively managed ETFs. The ability to purchase and redeem creation units gives ETFs an arbitrage mechanism intended to minimize the potential deviation between the market price and the net asset value of ETF shares. Existing ETFs have transparent portfolios, so institutional investors will know exactly what portfolio assets they must assemble if they wish to purchase a creation unit, and the exchange disseminates the updated net asset value of the shares throughout the trading day, typically at 15-second intervals. If there is strong investor demand for an ETF, its share price will temporarily rise above its net asset value per share, giving arbitrageurs an incentive to purchase additional creation units from the ETF and sell the component ETF shares in the open market. The additional supply of ETF shares reduces the market price per share, generally eliminating the premium over net asset value. A similar process applies when there is weak demand for an ETF: its shares trade at a discount from net asset value. 12

Types Of ETF 1. Equity Funds Most ETFs track equity indexes or sectors. Some index ETFs mimic an index in its entirety, and others use representative sampling, which deviates slightly by using futures, option and swap contracts, and the purchase of stocks sometimes not found in the index. If this sampling gets too aggressive, it can lead to tracking errors. Any ETF with a tracking error above 2% is considered actively managed . As ETFs become more and more specialized, this is something investors should watch for. 2. Fixed-Income Funds Most financial professionals recommend that you invest a portion of your portfolio in fixed-income securities such as bonds and bond ETFs. This is because bonds tend to reduce a portfolio's volatility, while also providing an additional stream of income. The age-old question becomes one of percentages. What amount should go to equities, fixed income and cash? This is commonly referred to as asset allocation. As with equity funds, there are many bond funds available. Investors who are unsure of what type to invest in should consider total bond-market ETFs, which invest in the entire U.S. bond market. 3. Commodity Funds Before investing in commodity ETFs, it's important to understand why you are interested in commodities in the first place. Historically, commodities have had little price correlation with equities. Experts suggest that strategic asset allocation accounts for 90% of a portfolio's return. However, it's not enough to have stocks, bonds, cash, commodities and real estate in your portfolio. You should also diversify within each of those asset classes. That's where ETFs come in. Investors can buy a commodity ETF that tracks the price changes of particular commodities like gold or oil, or in a commodity stock ETF that invests in the common shares of commodity producers. The former has little correlation with stocks, while the latter is highly correlated. If your portfolio already contains equities, a straight commodity ETF may make more sense. 4. Currency Funds As the world's currencies become more volatile and the U.S. dollar's role as a reserve currency slowly fades, investors wanting to protect the value of their U.S.-denominated investments will seek options that provide a hedge against a depreciating dollar. One option is to invest in foreign stocks or foreign stock ETFs. 13

However, this won't provide you with asset class diversification because foreign stocks are generally correlated with U.S. stocks. A better alternative is to invest in foreign currency ETFs. Whether it's a single currency or one with a broader focus, the intention here is to insulate your portfolio from a depreciating U.S. dollar. On the other hand, if the U.S. dollar is appreciating and you own foreign stocks, you can protect the value of those holdings by shorting the same currency ETF. It's important to remember that currency investing should represent a small portion of your overall investment strategy and is meant to soften the blow of currency volatility. 5. Real Estate Funds Income investors wanting a little sizzle with their steak might consider real estate investment trust (REIT) ETFs. Whether you choose a fund that invests in a specific type of real estate or one that is broader in nature, the biggest attraction of these funds is the fact they must pay out 90% of their taxable income to shareholders. This makes them extremely attractive in terms of yield, despite the increased volatility compared to bonds. These funds are an excellent source of income, especially when short-term interest rates and inflation are near historic lows. (For more, see: How to Analyze Real Estate Investment Trusts.) 6. Specialty Funds As ETFs became more popular, a variety of funds emerged to meet every conceivable investment strategy, much like what happened with mutual funds. Two of the more interesting are inverse funds, which profit when a particular index does poorly, and leveraged funds, which can double or triple the returns of a particular index by using leverage, as the name implies. You can even buy ETFs that do both. If you choose to dabble in leveraged or inverse ETFs, it is important that you understand the risks. In general, they are extremely volatile and unreliable as long-term investments.

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Advantages of ETFs a) Diversification One ETF can give exposure to a group of equities, market segments, or styles. An ETF can track a broader range of stocks, or even attempt to mimic the returns of a country or a group of countries. b) Trades Like a Stock Although the ETF might give the holder the benefits of diversification, it has the trading liquidity of equity. In particular:  

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ETFs can be purchased on margin and sold short. ETFs trade at a price that is updated throughout the day. An open-ended mutual fund, on the other hand, is priced at the end of the day at the net asset value. ETFs also allow you to manage risk by trading futures and options just like a stock.

Because ETFs trade like a stock, you can quickly look up the approximate daily price change using its ticker symbol and compare it to its indexed sector or commodity. Many stock websites also have better interfaces for manipulating charts than commodity websites, and even provide applications for your mobile devices. c) Lower Fees ETFs, which are passively managed, have much lower expense ratios compared to actively managed funds, which mutual funds tend to be. What drives up a mutual fund's expense ratio? Costs such as a management fee, shareholder accounting expenses at the fund level, service fees like marketing, paying a board of directors, and load fees for sale and distribution. d) Immediately Reinvested Dividends The dividends of the companies in an open-ended ETF are reinvested immediately, whereas the exact timing for reinvestment can vary for index mutual funds. (One exception: Dividends in unit investment trust ETFs are not automatically reinvested, thus creating a dividend drag. 15

e) Limited Capital Gains Tax ETFs can be more tax-efficient than mutual funds. As passively managed portfolios, ETFs (and index funds) tend to realize fewer capital gains than actively managed mutual funds. Also, when an ETF buys or sells shares, it's considered an in-kind redemption and does not result in a tax charge. Mutual funds, on the other hand, are required to distribute capital gains to shareholders if the manager sells securities for a profit. This distribution amount is made according to the proportion of the holders' investment and is taxable. If other mutual fund holders sell before the date of record, the remaining holders divide up the capital gain and thus pay taxes even if the fund overall went down in value. f) Lower Discount or Premium in Price There is a lower chance of ETF share prices being higher or lower than their actual value. ETFs trade throughout the day at a price close to the price of the underlying securities, so if the price is significantly higher or lower than the net asset value, arbitrage will bring the price back in line. Unlike closed-end index funds, ETFs trade based on supply and demand and market makers will capture price discrepancy profits.

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Disadvantages of ETFs While the pros are many, ETFs carry drawbacks too. Among them: a) Less Diversification For some sectors or foreign stocks, investors might be limited to large-cap stocks due to a narrow group of equities in the market index. A lack of exposure to midand small-cap companies could leave potential growth opportunities out of the reach of ETF investors. b) Intraday Pricing Might Be Overkill Longer-term investors could have a time horizon of 10 to 15 years, so they may not benefit from the intraday pricing changes. Some investors may trade more due to these lagged swings in hourly price. A high swing over a couple hours could induce a trade where pricing at the end of the day could keep irrational fears from distorting an investment objective. c) Costs Could Be Higher Most people compare trading ETFs with trading other funds, but if you compare ETFs to investing in a specific stock, then the costs are higher. The actual commission paid to the broker might be the same, but there is no management fee for a stock. Also, as more niche ETFs are created, they are more likely to follow a low-volume index. This could result in a high bid/ask spread. You might find a better price investing in the actual stocks. d) Lower Dividend Yields There are dividend-paying ETFs, but the yields may not be as high as owning a high-yielding stock or group of stocks. The risks associated with owning ETFs are usually lower, but if an investor can take on the risk, then the dividend yields of stocks can be much higher. While you can pick the stock with the highest dividend yield, ETFs track a broader market, so the overall yield will average out to be lower.

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Performance of ETF’s in recent years Passive funds emerged in USA more than two decades ago. The first modern day exchange traded fund (ETF) S&P SPDR (Spiders) started trading in USA in in 1993. The market for ETFs has grown tremendously since then. Today, there are 2,000 ETFs listed in US. Industry estimates suggest that ETFs manage $4 trillion globally. India got its first ETF in the form of Nifty BeES in 2001 which was launched by Benchmark AMC. It was probably way ahead of its time in India. Realizing the category’s slow growth, Benchmark called it quits in 2011 by selling its schemes to global giant Goldman Sachs Mutual Fund. Sensing a potential for passive funds, Reliance Nippon Life lapped up Goldman Sachs schemes. Benchmark AMC managed merely Rs 70 crore in ETFs in 2004. Today, the size of the Indian ETF market has grown to Rs 65,124 crore. But if we compare the growth of ETFs with actively managed equity funds, the growth has been tepid at best. During the same period, the size of the actively managed equity funds has galloped from Rs 29,362 crore in 2004 to Rs 8.55 lakh crore as on October 2017. Let’s look at the reasons behind the slow growth of ETFs in India. The most important factor for investors and advisers’ aversion to this category is the superior performance of actively managed funds vis a vis passive funds. For instance, actively managed large cap fund category has delivered 15% CAGR return over a five-year period while BSE Sensex has grown by 12% during the same period. Since ETFs passively track their underlying indices, they come with lower expenses as compared to their active fund peers. ETFs which track the broader indices like Sensex and Nifty charge 0.05%-0.10% annual total expense ratio (TER) whereas the TER of actively managed funds can go up to as high as 3%. Due to their low-cost nature, ETFs have no room to pay commissions on par with actively managed funds, providing little incentive for distributors prefer to sell passive funds. Paltry commission and performance are not the only reasons for slow take off of passive funds. ETFs can be only bought through the exchange from demat accounts and majority of MF investors in India have been investing physically through their neighborhood distributors. Even those who possess demat accounts prefer to buy shares or subscribe to IPOs rather than buying dull ETFs. This is in sharp contrast to US where seven out of the 10 most actively traded securities on US stock markets last year were ETFs, not shares, says a Financial Times report.

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Passive funds are seeing huge inflows in US as active fund managers have found it increasingly difficult to beat the market due to an efficient and developed market. We are witnessing similar trend in India in the large cap funds space. Over a 10-year period, 45% of active funds have underperformed the Nifty 50. High costs/TER can be one of the reasons for this underperformance. That said, fund managers believe that there will be ample opportunities for outperformance especially, in the mid and small cap space, which are not well researched. The lackluster demand for ETFs in India has not stopped fund houses from launching ETFs. Starting from Gold ETFs and equity ETFs, fund houses are innovating their offerings by adding new flavor to their products. Today, we have ETFs to participate in US indices and debt markets. Further, while traditional ETFs mimic their underlying index based on market capitalization, the new age ETFs called smart beta ETFs have emerged. These ETFs which combine both active and passive methods of investing by looking at factors such as earnings, low volatility, return on equity, dividend yield, etc. through custom build indices. While this looks like an interesting innovation, investors should note that such ETFs may not be able to outdo active funds as the underlying factors/theme may not outperform in all market cycles. Active fund managers on the other hand can avoid such factors depending on market conditions. One area where smart beta ETFs score over active funds is that they do not come with key-person risk as they operate on fixed automated processes. While the ETF market could take decades to flourish in India, fund houses are fully prepared to cash in on this opportunity. The popularity of ETFs is growing due to the government’s plans to divest its holdings in PSUs through this route. The first divestment through CPSE ETF mopped up Rs 11,500 crore and the second version in the form of Bharat 22 ETF is expected to mop up Rs 8,000 crore. Fund houses are in intense race to get a mandate for managing such issues. Additionally, media reports suggest that the Employees Provident Fund Organization’s (EPFO) investment in ETFs is expected to touch Rs 45,000 crore by the end of this fiscal. This massive flush of flow into ETFs suggest that the category will only grow from here.

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Top performing ETF’s of the year Performance of ETFs Schemes

Latest Price

% Change

Asset Size

NAV

Returns in % (as on Mar 21, 2019)

(Rs. cr.) (Rs./Unit) 1wk 1mth 3mth 6mth

SBI - ETF Nifty Bank

1yr

2yr

3yr

301.33

0.19

1,242.39

300.73

3.3 10.7

9.3 13.4 23.8 18.5 24.0

Reliance ETF Bank BeES

3,029.47

0.08

4,966.80 3,035.73

3.3 10.7

9.3 13.4 23.8 19.3 24.4

Edelweiss ETS Banking

2,913.00

5.43

1.02 3,025.31

3.3 10.7

9.3 13.5 23.8 19.4 24.6

Kotak Banking ETF

305.65

0.33

5,579.17

304.86

3.3 10.7

9.3 13.4 23.7 19.3 24.6

Kotak NV 20 ETF

58.84

0.75

5.42

58.04

1.3

5.6

6.6

3.6 22.8 19.8 18.3

Reliance ETF NV20

583.81

0.31

18.11

580.91

1.3

5.6

6.5

3.5 22.7 19.6 18.2

-

3.41

56.76

1.3

5.4

6.4

3.3 22.0 19.1

382.00

-3.53

363.45

399.82

1.7

7.4

5.6

3.9 17.8 15.5 16.9

4,009.95

-0.02

75.08 4,002.97

1.7

7.5

5.6

3.8 17.7 15.4 17.0

SBI - ETF Sensex

402.42

0.06

10,000.00

403.49

1.7

7.5

5.6

3.8 17.7 16.4 17.5

Reliance ETF Sensex

398.40

1.30

14.45

405.77

1.7

7.4

5.6

3.8 17.7 15.3 16.8

ICICI Prudential NV20 ETF LIC MF ETF Sensex HDFC Sensex ETF

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The case of ETF’s in three charts ONE: ETF’s are not niche products ETFs have been around for more than two decades, but they’ve really taken off in the past five years or so. Today, investors of all types — from individuals to sophisticated institutions — have helped increase ETF assets to more than $3.1 trillion globally. And while that’s still a fraction of the $21 trillion invested in mutual funds, ETFs are growing at a faster pace, more than doubling in size over the past five years.1 Part of the appeal of ETFs is their flexibility. Unlike mutual funds, which can only be bought or sold once a day, at a price established at the market close, ETFs can be traded whenever the market is open, just like stocks. Investors can also trade them in the same way they do stocks, including selling short, or buying on margin, and there is no minimum investment amount required. Learn more about the differences between ETFs and mutual funds here.

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Two: Lower costs help you keep more of what you earn An even bigger draw of ETFs is the bottom line—reducing costs. The fees for most ETFs tend to be much lower than mutual funds, which means more money gets put to work for you. In fact, iShares Core ETFs average about one-tenth the net expense ratio of most mutual funds.² The impact of these cost savings can be meaningful, particularly over time or when market returns are sluggish. Here’s another potential benefit. ETFs tend to be relatively tax efficient and incur fewer undesirable capital gains distributions. So you can save up front, over time and on your tax bill.

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Three: ETFs make it easy to get in—and stay in—the market Ultimately, of course, pursuing your financial goals is about staying invested. Timing market ups and downs is nearly impossible to get right, and missing out on the rebounds can be costly. In the example here, missing just the five topperforming days over the past 20 years would have cost more than $160,000; missing the top 25 days would have nipped nearly 75% of potential gains. So instead of trying to outsmart the market, it may make more sense to simply be in the market, smartly.

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Data Analysis

The survey was conducted with 55 responses collected from different age groups where the share was 41.8% in the age of 18-24, 29.1% in the age of 25-34 and 27.3% in the age of 35-44.

Out of 55 responses 54.5% were male and 45.5% were female.

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76.4% of the people are aware about the mutual funds and other investment plans whereas remaining 23.6% do not invest at all.

55.6% of the people invests in mutual funds, 28.9% of the people invest in Exchange Traded Funds and remaining 15.6% invest in others like fixed deposit etc.

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As per the responses collected 45.8% are moderate risk taker, 33.3% are risk averse who prefers lower returns with known risk rather than higher returns with unknown risk and the lowest is 20.8% which are high risk taker.

As per the responses collected 37.5% of the people are Moderate in investment habits and they continue to save. 12.5% are people with little savings whereas 14.6% are people who are starting out.16.7% people are significant in their investment habits and have accumulated significant investment assets.

The longest term period to invest is more than 5 years according to the response it was 33.3% and the lowest time period in which people invest in less than 1 year which is 10.4% out of the total response received.

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People invest mostly according to the Web sites past performance of the fund which is 25%. The equal weightage is given to two factors friends & relatives and others. The lowest is Brand name which is 6.2%.

65.2% of the respondents feel that ETF is a strong alternative than large cap funds and remaining 34.8% do not feel that ETF can take pla

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As per the responses collected 28.3% of the people invest 0 to 5% from their income, 26.1% people invest 5 to 10% from their income, 21.7% invest 10 to 15% from their disposable income, 13% of the people from their 15 to 20% of their income and 10.9% of people invest above 20% from their income.

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FINDINGS The aim of the study is to understand the mindset of people towards investment in mutual funds or ETF’s. To analyse the performance of Exchange Traded Funds in recent years and to know whether people are aware of ETF’s or not.  The study found that people are involved in investing activities as 76.4% of the respondents said that they invest.  In India people have started investing in ETF’s as they are becoming more aware. It also suggests that you can move in and out of markets quickly.  In the age group of 18-25 it has been seen that people are not really aware of ETF’s and are more comfortable in investing in mutual funds.  An another observation made by study was people are moderate risk taker and are less likely to take higher risk.  People are moderate in their lifestyle and investments habits which implies they save a little and aspire to do so.  As per the survey conducted around 60% of respondents feel that ETF’s are a strong alternative to large cap funds.  People who earn 2.5 to 5 Lacs or above 10 Lacs invest 15 to 20% of their disposable income which implies that people are willing to invest.

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Recommendations and Conclusions  We know India is an emerging market they know/ how to save/invest in order to secure future. There are many traditional ways of saving. They give returns according to high and low risk. India is a young country having a considerably big part of young people. They are more risk averse people. They need a right direction for investment in the age group of 18-25. As per the respondents people in the age group of 18-25 are not really aware of ETF’s.  Innovation has been the hallmark of the ETF industry since its beginnings less than 25 years ago. Undoubtedly, there will be new and more unusual ETFs introduced in the years to come. While innovation is a net positive for investors, it’s important to realize that not all ETFs are created equal. You should investigate carefully before investing in any ETF, carefully considering all factors to ensure that the ETF you choose is the best vehicle to achieve your investment goals.  The heightened market volatility in 2018 took a toll on the performance of large cap schemes as exchange-traded funds—which track an index, a commodity, bonds, or a basket of assets—managed to beat “actively managed funds” by providing superior returns to investors during the year.  You need a demat and trading account to invest in ETFs in India. If you are not comfortable with opening and maintaining these accounts, ETFs may not be appropriate for you. You can also invest in passive indices through index funds, rather than ETFs if you do not want to open demat and trading accounts.

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Questionnaire 1. Email Address -------------------------2. Age      

18-24 25-34 35-44 45-54 55-64 65+

3. Gender  Male  Female 4. Do you invest?  Yes  No 5. If Yes where?  Mutual Funds  ETF(Exchange Traded Funds)  Others 6. What kind of investor are you ?  Risk Averse  Moderate Risk Taker  High Risk Taker

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7. How would you describe your current lifestyle and investment habits?  Significant- have accumulated significant investment assets  Moderate-have saved a moderate amount and continuing to save  Primarily Debt Payment -have increased my income, but i am primarily paying down debt.  Little Savings-have saved a little bit, but need to borrow frequently  Starting Out 8. How long would you like to invest?     

Less than a year 1-2 year 2-3 years 3-5 years More than 5 years

9. On what basis you invest?       

Friends and relatives Advertisements Company Brokers and agents Brand name Web sites Past performance of the fund Chartered Accountants Other

10.Do u think ETF's is a strong alternative to large cap funds?  Yes  No 11.What is your annual income approximately?     

0 to 2.5 Lacs 2.5 to 5 Lacs 5 to 7.5 Lacs 7.5 to 10 Lacs Above 10 Lacs 32

12.What percent of your disposable income do you keep aside for investment options?     

0% to 5% 5% to 10% 10% to 15% 15% to20% Above 20%

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References  www.investopedia.com  A literature review and ETF’s future in India – Ravi Samalad  https://economictimes.indiatimes.com/mf/analysis/why-index-funds-etfsare-better-than-large-cap-funds/articleshow/67138912.cms?from=mdr  A review on investors perception on returns, risk and awareness of mutual funds. Prafulla Kumar Swain ,Professor, Institute of Business & Computer Studies (IBCS), Siksha'O' Anusandhan University, Bhubaneswar, Odisha, India

 https://www.bnpparibasmf.in/learn-invest/understanding-risk-return

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