final mutual funds 18-8-10

8/9/2019 Final Mutual Funds 18-8-10

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Contribution of Mutual Fund ToContribution of Mutual Fund To

Savings In IndiaSavings In India


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MEANING OF MUTUAL FUNDMEANING OF MUTUAL FUND

AA MutualMutual FundFund isis aa trusttrust thatthat poolspools thethe savingssavings ofof aa numbernumber ofof

investorsinvestors whowho shareshare aa commoncommon financialfinancial goalgoal..

TheThe moneymoney thusthus collectedcollected isis thenthen investedinvested inin capitalcapital marketmarketinstrumentsinstruments suchsuch asas shares,shares, debenturesdebentures andand otherother securitiessecurities..

WhenWhen youyou investinvest inin aa mutualmutual fund,fund, youyou areare buyingbuying unitsunits ororportionsportions ofof thethe mutualmutual fundfund andand thusthus onon investinginvesting becomesbecomes aashareholdershareholder oror unitunit holderholder ofof thethe fundfund..

TheThe incomeincome earnedearned throughthrough thesethese investmentsinvestments andand thethe capitalcapital

appreciationappreciation realisedrealised areare sharedshared by by itsits unitunit holdersholders ininproportionproportion toto thethe numbernumber ofof unitsunits ownedowned byby themthem..

ThusThus aa MutualMutual FundFund isis thethe mostmost suitablesuitable investmentinvestment forfor thethecommoncommon manman asas itit offersoffers anan opportunityopportunity toto investinvest inin aa

diversified,diversified, professionally professionally managedmanaged basketbasket ofof securitiessecurities atat aarelativelrelativel lowlow costcost..


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IMPORTANT PHASES IN INDIANIMPORTANT PHASES IN INDIAN

MUTUAL FUND INDUSTRYMUTUAL FUND INDUSTRY

1963 1987

UTI sole player in the industry, created by an Act of Parliament ,1963UTI launches first product Unit Scheme 1964

UTI creates products such as MIP's, children plans ,offshore funds etc

MASTERSHARE Ist Diversified Equity Investment Scheme in India.

INDIA Fund Ist indian offshore fund lauched in August 1996.

1987 - 1993

In 1987 Public Sector Banks and FI's got permission to set up MF.

SBI mutual fund was the first non -UTI mutual fund

1993 - 1996

In 1993, Mutual Fund Industry was open to private players.

SEBI's first set of regulations for the industry formulated in 1993

Significant innovations, mostly initiated by private players

1996 - 1999

Implementation of new SEBI regulations led to rapid growth

Bank mutual funds were recast as per SEBI guidelines

UTI came under voluntary SEBI supervision.

Dividends made tax free in 1999.

1999 - 2000

Rapid growth, significant increase in corpus of private players

Tax break offered created arbitrage opportunities

Bond funds and liquid funds registered highest growth


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TYPES OF MUTUAL FUNDSTYPES OF MUTUAL FUNDS

Type of

Mutual Fund

Schemes

Structure InvestmentObjective

Special

Schemes

Open Ended

Funds

Close Ended

Funds

Interval Funds

Growth Funds

Income Funds

Balanced Funds

Money Market

Funds

Industry Specific

Schemes

Index

Schemes

Sectoral

Schemes


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WHY INVEST IN MUTUAL FUNDS?WHY INVEST IN MUTUAL FUNDS?

SAVE THROUGH MUTUAL FUNDS INVEST THROUGH MUTUAL FUNDS

Park surpluses

Short term investment

Easy liquidity

Tax benefits

Have a long term objective

Profile your risk

Select appropriate MF scheme,

based on risk return requirement

Mix of equity and debt

Invest regularly/with flexibility


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TYPES OF MUTUAL FUNDSTYPES OF MUTUAL FUNDS

OpenOpen--ended Fundended Fund

OpenOpen--endedended meansmeans that,that, atat thethe endend ofof everyevery day,day, thethe fundfund

issuesissues newnew sharesshares toto investorsinvestors andand buys buys back back sharesshares fromfrom

investorsinvestors wishingwishing toto leaveleave thethe fundfund..

AnAn investorinvestor cancan buybuy oror sellsell thethe unitsunits atat "NAV""NAV" (Net(Net AssetAsset

Value)Value) relatedrelated priceprice atat anyany timetime..


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CloseClose--Ended fundEnded fund

AA CloseClose--EndedEnded fundfund isis openopen forfor subscriptionsubscription onlyonly duringduring aa

specifiedspecified period,period, generallygenerally atat thethe timetime ofof initialinitial publicpublic issueissue..

TheThe CloseClose--EndedEnded fundfund schemescheme isis listedlisted onon thethe somesome stockstock

exchangesexchanges wherewhere anan investorinvestor cancan buybuy oror sellsell thethe unitsunits ofof thisthis

typetype ofof schemescheme..


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Exchange-traded funds

ETFs combine characteristics of both mutual funds

and closed-end funds.

ETFs are index funds and track stock market indexes.

Shares are issued or redeemed by institutional

investors in large blocks (typically of 50,000)

Exchange-traded funds are also valuable for foreign

investors


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Equity funds

Equity funds, which consist mainly of stock investments, are

the most common type of mutual fund.

Risk is higher than debt funds but offer very high growth

potential for the capital.

Equity funds must have a long-term objective.


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Bond funds

Bond funds account for 18% of mutual fund assets.

Types of bond funds include term funds, which have a fixedset of time (short-, medium-,or long-term) before they mature.

High-yield bond funds invest in corporate bonds, including

high-yield or junk bonds


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Money market funds

Money market funds entail the least risk, as well as lower ratesof return.

Invest in securities of short term nature i.e. less than one yearmaturity.

Invest in Treasury bills issued by government, Certificates ofdeposit issued by banks, Commercial Paper issued companiesand inter-bank call money.

Aim to provide easy liquidity, preservation of capital andmoderate income.


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Debt Funds

These Funds invest a major portion of their corpus in debtpapers. Government authorities, private companies, banksand financial institutions are some of the major issuers ofdebt papers.

Target low risk and stable income for the investor.

Have higher price fluctuation as compared to money

market funds due to interest rate fluctuation

Carry both credit risk and interest rate


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Balance Funds

Mix of both equity and debt funds

They invest in both equities and fixed income securities, which

are in line with pre-defined investment objective of the scheme

Objective is to gain income, moderate capital appreciation and

preservation of capital


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MUTUAL FUNDS INDUSTRY INMUTUAL FUNDS INDUSTRY IN

INDIAINDIA


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ADVANTAGES OF MUTUALADVANTAGES OF MUTUAL

FUNDSFUNDS PortfolioPortfolio diversificationdiversification::

ItIt enablesenables himhim toto holdhold aa diversifieddiversified investmentinvestment portfolioportfolio

ProfessionalProfessional managementmanagement::

TheThe investmentinvestment managementmanagement ensureensure aa muchmuch betterbetter returnreturn asas

comparedcompared toto whatwhat anan investorinvestor cancan managemanage onon hishis ownown..

Reduction/DiversificationReduction/Diversification ofof RisksRisks::

TheThe potentialpotential losseslosses areare sharedshared withwith otherother investorsinvestors


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Liquidity:Liquidity:

Investors may be unable to sell shares directly, easily andInvestors may be unable to sell shares directly, easily andquicklyquickly

Convenience and Flexibility:Convenience and Flexibility:

InvestorsInvestors cancan easilyeasily transfertransfer theirtheir holdingsholdings fromfrom oneoneschemescheme toto other,other, getget updatedupdated marketmarket informationinformation

Transparency:Transparency:

Fund gives regular and clear information to its investorsFund gives regular and clear information to its investors


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DISADVANTAGES OF MUTUALDISADVANTAGES OF MUTUAL

FUNDSFUNDS


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WHY INVEST IN MUTUAL FUNDS?WHY INVEST IN MUTUAL FUNDS?


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Myths about Mutual FundsMyths about Mutual Funds


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REGULATIONSREGULATIONS

GovernedGoverned byby SEB

ISEB

I (Mutual(Mutual Fund)Fund) RegulationRegulation 19961996 AllAll MFsMFs registeredregistered withwith it,it, constitutedconstituted asas truststrusts

(( underunder IndianIndian TrustsTrusts Act,Act, 18821882))

BankBank operatedoperated MFsMFs supervisedsupervised byby RBIRBI tootoo

AMCAMC registeredregistered asas CompaniesCompanies registeredregistered underunderCompaniesCompanies Act,Act, 19561956

SEBISEBI-- VeryVery detaileddetailed guidelinesguidelines forfor disclosuresdisclosures inin offeroffer

document,document, offeroffer period,period, investmentinvestment guidelinesguidelines etcetc.. NAVNAV toto bebe declareddeclared everydayeveryday forfor openopen--ended,ended, everyevery weekweek

forfor closedclosed endedended

DiscloseDisclose onon website,website, AMFI,AMFI, newspapersnewspapers

HalfHalf--yearlyyearly results,results, annualannual reportsreports

SelectSelect BenchmarkBenchmark dependingdepending onon schemescheme andand comparecompare


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MUTUAL FUND COMPARISONMUTUAL FUND COMPARISON

Absolute returnsAbsolute returns % difference of NAV% difference of NAV

Diversified Equity with Sector FundsDiversified Equity with Sector Funds NONO

Benchmark returnsBenchmark returns SEBI directsSEBI directs

Fund's returns compared to its benchmarkFund's returns compared to its benchmark

Time periodTime period Equal to time for which you plan to investEqual to time for which you plan to invest

EquityEquity-- compare for 5 years, Debtcompare for 5 years, Debt-- for 6 monthsfor 6 months

Market conditionsMarket conditions Proved its mettle in bear marketProved its mettle in bear market


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INVESTMENT STRATEGIESINVESTMENT STRATEGIES


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final mutual funds 18-8-10

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