uti mutual fund welcome delegates to program “mutual fund – concepts and benefits presented by...
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UTI MUTUAL FUNDWelcome
Delegates to Program
“MUTUAL FUND – CONCEPTS AND BENEFITS
Presented by Sh Rakesh Trikha, VP,Regional sales Head , UTI Mutual Fund , New Delhi
An introduction to
Mutual Funds
What are mutual funds?• A pool of money.• Investors having a common interest.• In accordance with the stated objective.• Fund manager invests money on
investors behalf.• Example:- Equity fund invests in equities,
Debts funds invests in bonds, debentures, gilts etc. and Hybrid fund invest in both
Graphical Representation
History Of Mutual FundsIndian MF Industry has gone through 3 phases :-
• Phase 1- 1964 – 1987 (UTI was the only player)
• Phase 2- 1987 – 1993 (Entry of Public sector Banks backed Mutual Funds)
• Phase 3- 1993 onwards. ( Mutual funds from Pvt. Sector start operations and regulatory authority SEBI comes onto being)
Why invest in a mutual fund?..(1)
• Professional Management
experience and resources to thoroughly analyze the
economy/markets to spot good investment opportunities
Why invest in a mutual fund?..(2) • Diversification:
Reduces the risk to which you would've been exposed by
investing in a single stock/bond
Invests in a broad cross section of industries or companies –
negative performance of one security will not have as much
of an impact on the fund
Why invest in a mutual fund?..(3)
• Liquidity & Convenience:
You will be able to get your money back within a short period as compared to other securities
Very little paperwork
Helps avoid problems such as bad deliveries, delayed payments and unnecessary follow up with brokers
and companies
Why invest in a mutual fund?..(4)
• Tax Efficiency:
Some mutual fund schemes offer tax benefits under Section 80-C
TAX FREE Dividends/LONG TERM CAPITAL GAIN( > 12 month) under Equity schemes
Only 10 % Long term capital gain under Debt Schemes v/s High taxation under FD/Post office schemes
Mutual funds offer favourable post-tax returns
Broad Classification
Types of Mutual Funds
Constitution
Investment Objective
Open Ended
Close Ended
Interval
Equity Funds
Debt Funds
Hybrid Funds
Types of Mutual Funds
By Constitution
Open Ended Schemes
• Open-ended schemes do not have a fixed maturity period / lock-in-period.
• Investors can buy or sell units at current NAV on any business day.
Close Ended Schemes• Close-ended schemes have fixed maturity periods.
• Investors can buy into these funds during the period when these funds are open in the initial issue.
• For Example :- UTI – Lifestyle fund, UTI wealth Builder Fund, UTI – Capital Protection Fund
Interval Schemes• These schemes combine the features of open-
ended and closed-ended schemes. • They may be traded on the stock exchange or
may be open for sale or redemption during pre-determined intervals at NAV based prices.
• For example: Tax saving schemes where they are closed ended for 3 years usually and then become open-ended.
Types of Mutual Funds
ByInvestment Objective
Equity Funds
• They invest the funds in stocks and shares of Companies.
• Investors can diversify their risks of investing in the markets in a typical equity oriented Mutual fund.
Debt Funds • These schemes invest in debt
instruments such as corporate bonds, debentures and government securities.
• The prices of these schemes tend to be more stable as compared to Equity schemes.
• These schemes are ideal for conservative investors or those not in a position to take higher Equity risks, such as retired individuals.
Hybrid Funds• Commonly known as Balanced Funds• They invest in both equities as well as debt. • The debt component in the Balanced schemes
seek to regular income and the equity component aims to generate capital appreciation.
• Ideal for investors who would like to take slight exposure to equity but still want an element of safety in their portfolio.
• For Example :- UTI Balance Fund, UTI Mahila Unit Scheme , UTI Children Career Plan
Further classification
Equity Funds Debt FundsHybrid Funds
Diversified
Large-cap
Mid & Small-cap
Sectoral
Index
Tax saving
Balanced
Monthly Income Plan
Liquid
Fixed Maturity Plan
Gilt
Income
Short-term
Equity Funds – Diversified• The investment objectives does not restrict
these funds from investing only in specific industries or sectors.
• These funds have a diversified portfolio of companies spread across a vast spectrum of industries.
• These schemes are exposed to equity price risks.
• For Example :- Leadership Fund ,
Equity Fund- Sectoral• These schemes restrict their investing
to one or more pre-defined sectors.• These schemes are inherently more
risky than general-purpose schemes.• They are best suited for informed
investors who wish to take a view and risk on the concerned sector.
• For Example :- UTI – Software fund, Services Fund, Pharma and Healthcare, Auto etc.
Equity Funds - Index based• An Index serves as a relevant benchmark to evaluate the
performance of Mutual Funds. • Investors are comfortable investing in a fund that they
believe is a good representative of the entire market. • Index funds move in line with the Index in the falling market
and provide the much-needed risk mitigation.• Pure Index fund :
• UTI MIF (sensex)
• UTI NIF ( Nifty)
• Index based fund : UTI Index select Equity fund
Equity Funds - Tax Saving
• Also known as ELSS ( equity linked saving schemes ).
• Gives a tax benefit to the investors under Sec 80C
• Units purchased cannot be transacted until completion of 3 years from the date of allotment of the respective Units.
• An example of ELSS scheme is the UTI Equity Tax Saving Plan (ETSP).
SECTOR
FUND
SECTOR ROTATION FUND
Thematic fund
DIVERSIFIED FUND
INDEX FUND
Risk
Leadership fund can give higher and sustainable return
Return
FUND POSITIONING
Hybrid Funds• Balanced Funds – They invest in a
combination portfolio where usually 60% is in Equity and 40% in debt.
• Monthly Income Plan – They have a higher component in debt even up to 80% and 20% in equity. They are a safe investment with a kicker from equity for returns.
• There can be multiple combinations depending upon scheme objectives
Debt Funds - Money Market Schemes
• These schemes invest in short term instruments such as commercial paper ("CP"), certificates of deposit ("CD"), treasury bills ("T-Bill") and overnight money ("Call").
• The schemes are the least volatile of all the types of schemes because of their investments in money market instruments with short-term maturities.
Debt Funds - Liquid Funds
• Liquid Schemes invest in call money market and short maturity papers.
• They are highly liquid and one can make investments in them even for a day.
• There are no Entry and Exit loads in liquid funds.
• For Example :- UTI – Liquid Cash Plan.
Debt Funds - Short-term Bond Funds
• They are good for investors who want to make investments for a period of 3-6 months.
• They usually deliver returns which are 25-50 basis points more than the call money market rates.
• They invest in Corporate bonds and Commercial Paper
• Example : UTI Liquid Plus Scheme
Debt Funds - Income Funds• These schemes invest in money markets, bonds
and debentures of corporate with medium and long-term maturities.
• These are suitable for conservative investors who have medium to long-term investment horizon and are looking for regular income through dividend or steady capital appreciation.
• They usually deliver returns which are more than 100 – 150 basis points more than the call money market
• Example : UTI – MIS Advantage Plan
Debt Funds - Gilt Funds
• These schemes primarily invest in Government securities.
• Hence the investor usually does not have to worry about credit risk since Government Debt is generally credit risk free.
• For Example :- UTI Gsec Fund
How do I make money from a
mutual fund?.....
• Capital appreciation:
As the value of securities in the fund increases, the fund's unit price will also increase. You can make a profit by selling the units at a price higher than at which you bought
• Income Distribution:
The fund passes on the profits it has earned in the form of dividends
Options to investGROWTH OPTION
• Best suitable for investors looking for long term investments.
• The amount invested goes on accumulating.
• On redemption one would receive the market value of investment.
• It is also called as money accumulator.
Options to investDIVIDEND OPTION
• Dividend Payout :- Suitable for investors who want regular income. The dividend amount comes in the hand of the investors
• Dividend Reinvestment :- The investor gets units equivalent to the amount of dividend declared which gets re-invested into the scheme.
Modes Of Investment• Lump-sum investment – Making a one time investment
in a scheme
• Systematic Investment Plan – Investing a small sum of money regularly
• Systematic Transfer Plan – making a systematic transfer of profits from 1 fund to another
• Systematic Withdrawal Plan – withdrawal of funds from a scheme on a regular basis to gain regular income.
NAV• The Term NAV means Net Asset Value.• Net Asset Value is the market value of the securities
held by the scheme.
The market value of securities of a schemeNAV = ______________________________________________ Total number of units of the scheme on any particular date.
• For example, if the market value of a Mutual Fund scheme is Rs.200 lakhs and it has issued 10 lakh units of Rs.10 each, to the investors, then the NAV per unit of the fund is Rs.20.
Loads or Charges on MF• Entry Load :- Generally all mutual funds
especially equity funds have an entry load on its purchase.
• Entry load is calculated on the current NAV of the fund.
• Generally a fund house charges an entry load of 2% to 2.25%.
Contd..
• Exit Load :- An Exit load is charged by the fund house when one wishes to exit or redeem his units.
• Exit load is also calculated on the current NAV.
• Generally a fund house charges 1% exit load on all equity schemes if exited before 6 months.
Tax Aspects
In case of dividend income• In the hands of the investors, dividend is tax-
free.
• Dividend distribution tax is at the rate of 12.81% payable by the AMC only incase of Debt funds.
Capital Gain Tax
• Capital Gain = selling price – purchase price.
• Capital gains are of two types:
Short Term Capital Gain
Long Term Capital Gain
Tax Rules for Mutual Fund Investors
EQUITY SCHEMES (Equity investment < 65% of fund
size)*
SHORT TERM
CAPITAL GAINS
LONG TERM
CAPITAL GAINS
TDS
Resident Individual/HUF
10% NIL NIL
Partnership Firms
10% NIL NIL
NRIs 10% NIL STCG 11.33% (10%+10% SC+ 3%ES)
* UTI Infrastructure Fund, Service Sector, DYF, Leader Ship Fund etc.
Tax Rules for Mutual Fund Investors
NON EQUITY SCHEMES (Equity investment less than
equal to 65% of fund size)
SHORT TERM
CAPITAL GAINS
LONG TERM
CAPITAL GAINS
TDS
Resident Individual/HUF
Marginal rate 10%(20% WITH INDEXATION)
NIL
Partnership Firms 30% 10%(20% WITH INDEXATION)
NIL
NRIs Marginal rate 10%(20% WITH INDEXATION)
STCG-30%, LTCG-20% (after
indexation)
*FMP, MIPs, Liquid Funds etc.
Tax Rules for Mutual Fund Investors
DIVIDEND INCOME
DIVIDEND DISTRIBUTION TAX
ALL SCHEMES EQUITY SCHEMES
LIQUID SCHEMES
NON EQUITY SCHEMES
Resident Individual/HUF
TAX FREE NIL 28.325%(25%+10SC+3%ES)
14.1625(12.5%+10%SC+3%ES)
Partnership Firms
TAX FREE NIL 28.325%(25%+10SC+3%ES)
22.66%(20%+10%SC+3%ES)
NRIs TAX FREE NIL 28.325%(25%+10SC+3%ES)
14.1625(12.5%+10%SC+3%ES)
UTI Liquid and Liquid Plus
UTI Liquid Fund-Cash Plan
UTI Liquid Plus Fund
Entry Load NIL NIL
Exit Load NIL 0.15% if redeemed between 0-7 days
DDT 28.325% 14.1625%
WEALTH TAX &GIFT TAX FOR MF UNITS
WEALTH TAX MF units are exempt
GIFT TAX MF units are exempt
INCOME TAX PROVISIONS ON CLUBBING FOR GIFT OF UNITS
Dividend Income As dividend is tax free in hands of unit holder, hence no tax applicable on either Donee or Donor
ST/LT Capital Gain Loss
If the transferee or donee is:
“spouse Son’s wife or minor son : gain/loss clubbed with that of the donor of units “
Other independent donee : gain/loss treated as donee’s gain/loss and not clubbed with that of donor
Investment option – Tax on Income
Asset Type of income
Tax
Listed equity shares Dividend Exempt
Unlisted equity shares Dividend Exempt
Equity-oriented mutual funds
Income distribution Exempt
Non Equity mutual funds Income distribution Exempt
Derivatives (futures) No income NA
Gold/precious metals No income NA
Paintings No income NA
Real estate Rent Taxable
Investment option – Tax on Capital Gain
Asset Period of holding
required to makeasset long-term
Tax on profit, if asset is long-term
Tax on profit,if asset isshort-term
Listed equity shares 12 months NIL 10%
Unlisted equity shares
12 months 20% Normal rate
Equity-oriented mutual funds
12 months NIL 10%
Non equity mutual funds
12 months 20% Normal rate
Derivatives (futures) N A NIL NA
Gold/precious metals
36 months 20% Normal rate
Paintings 36 months 20% Normal rate
Real estate 36 months 20% Normal rate
Risks Involved in Mutual Funds
• Market RiskDepends on the volatility of market.
• Inflation Risk
Inflation risk occurs when prices rise faster than returns.
Risks Involved in Mutual Funds• Interest Rate Risk This generally applies to debt funds.An
increase or decrease in interest rate affects the bond prices.
• Investment Risks The NAV of the schemes are linked to the
equity performance of such companies and may be more volatile than a more diversified portfolio of Equities.
For Further Queries Reach Your Financial Advisor
orUTI MF Team Dehradun at
S.P.S Oberai , Chief Manager 98975 40022, Relationship Manager(s) 9897000972, 982, 992
website: utimf.comToll Free No 1800 22 1230
THANK YOUTHANK YOUDisclaimer
Risk Factors : - All investments in Mutual Funds and securities are subject to market risk and the NAV of the Funds may go up or down
depending on the factors & forces affecting the securities market. Past performance of the Sponsor/Mutual Fund/ Scheme(s)/AMC is not
necessarily indicative of the future results. UTI CCP (Balanced Plan) is just the name of the scheme and not in any manner indicate the quality of the scheme, its future prospects or returns. The scheme is subjected
to the risks relating to interest rate ,liquidity, securities lending, investment in overseas market, trading in equity and debt derivatives. There may be instances where no income distribution could be made.
Please read offer document and consult your financial advisor before investing