Final Mutual Funds 18-8-10
Transcript of 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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