basics of mutual fund final

7/30/2019 Basics of Mutual Fund Final

1/12

Basics of Mutual Fund


2/12

Flow of Presentation :

What is Mutual Fund?

Structure of Mutual Fund

Parties to Mutual Fund

Advantages of Mutual Fund

Disadvantages of Mutual Fund

NAV

Types of Fund

SIP


3/12

What is Mutual Fund?

Regulatory Body :

A mutual fund is a company that pools money taken from many investors& invests the money in stock, bonds & other securities.

The returns earned through these investments are shared by its investor

in ratio to the units owned.

India SEBI UK FSA

US - SEC

AUM Asset under Management :The total value of all the investments which are currently being managed

by the fund. Depending upon the market conditions, it keeps on

changing.


4/12


5/12

Parties to Mutual Fund :

Sponsors

Trust/Board of Trustees

AMC Asset Mgmt Company

Fund Manager

Investor

Transfer Agent

Regulatory Body


6/12


7/12

Disadvantages of Mutual Fund :

High Cost

Dependent on Fund Manager

Less predictable income


8/12

What is NAV, how is it calculated?

Net Asset Value is the market value of the assets of the scheme minus

its liabilities. The per unit NAV is the net asset value of the scheme

divided by the number of units outstanding on the Valuation Date.

Total Assets Total Liabilities

Net Asset Value = ----------------------------------------

Number of Outstanding Shares

NAV = (Market Value of All Securities Held by Fund + Cash and Equivalent

Holdings Fund Liabilities) / Total Fund shares Outstanding

Let's assume at the close of trading yesterday that a particular mutual

fund held Rs.10,50,000 worth of securities, Rs. 2,00,000 of cash, and

Rs. 5,00,000 of liabilities. If the fund had 1,00,000 shares outstanding,

then yesterday's NAV would be:

NAV = (10,50,000 + 2,00,000 5,00,000) / 1,00,000 = 7.5 Rs.


9/12

Types of Funds :Money Market Funds: Invest in short-term (less than one year to maturity) corporateand government debt securities such as treasury bills, bankers acceptances and

corporate notes.Debt Funds : Debt funds are those funds that invest a huge portion in debt papersissued by Government Authorities, Private Companies, Banks & Financial Institution.

These funds carry low risk & provide stable income to the investors.

Fixed Income Funds: Invest in debt securities like bonds, debentures and mortgages

that pay regular interest, or in corporate preferred shares that pay regular dividends.The goal, typically, is to provide investors with a regular income stream with low risk.

Growth or Equity Funds: Invest primarily in common shares (equities), but may holdother assets as well. The goal is typically long-term growth because the value of the

assets held increases over time. Some growth funds focus on large blue-chip

companies, while others invest in smaller or riskier companies.

Specialty Funds: May invest primarily in a specific geographical area (e.g., Asia) or a

specific industry (e.g., high technology companies). Index Funds: Invest in a portfolio ofsecurities selected to represent a specified target.

Balanced Funds:Invest in a balanced portfolio of equities, debt securities and moneymarket instruments with the objective of providing reasonable returns with low to

moderate risk


10/12

SIP Systematic Investment PlanIt is a method of investing in Mutual Fund. A Systematic Investment Plan is a

periodic investment in Mutual Fund.

Date NAVApprox units you

will get at Rs.1000

Jan 1 10 100

Feb 1 10.5 95.23

Mar 1 11 90.90Apr 1 9.5 105.26

May 1 9 111.11

Jun 1 11.5 86.95

Within six months, you would have 5,89.45 units by investing just 1,000 everymonth.

If the NAV for this particular fund is Rs.11 on Jul 1 then the value of fund

would be,

Total Investment = 1000 * 6 months = 6000 Rs.

Total Units owned = 589.45 (as mentioned above)As on Jul = 589.45 * 11 = 6483.95 Rs.


11/12


12/12

basics of mutual fund final

Documents