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BY NITHYA.D PARAMESHWARI RAJARAMACHANDRAN.S RAVICHANDRAN.S

BY

NITHYA.D

PARAMESHWARI

RAJARAMACHANDRAN.S

RAVICHANDRAN.S

MUTUAL FUNDS

MUTUAL FUNDS  A mutual fund is a professionally managed type of collective investment scheme that

A mutual fund is a professionally managed type of collective

investment scheme that pools money from many investors and

invests it in stocks, bonds, short-term money market

instruments and other securities.

Mutual funds have a fund manager who invests the money on

behalf of the investors by buying / selling stocks, bonds etc.

The income earned through these investments and the capital

appreciation realized by the scheme are shared by its unit

holders in proportion to the number of units owned by them.

Currently, the worldwide value of all mutual funds totals more than $US 26 trillion.

HOW MUTUAL FUNDS WILL WORK?

HOW MUTUAL FUNDS WILL WORK?
HOW MUTUAL FUNDS WILL WORK?

STRUCTURE OF MF IN INDIA

STRUCTURE OF MF IN INDIA  Mutual Funds in India follows a 3-tier structure.  There

Mutual Funds in India follows a 3-tier structure.

There is a Sponsor (the First tier), who thinks of starting a mutual fund. The Sponsor approaches the Securities & Exchange Board of India (SEBI), which is the market regulator and also the regulator for mutual funds. Once SEBI is convinced, the sponsor creates a Public Trust (the Second tier) as per the Indian Trusts Act, 1882.

WHO MANAGES INVESTOR’S MONEY?

WHO MANAGES INVESTOR’S MONEY?  This is the role of the Asset Management Company (the Third

This is the role of the Asset Management Company (the Third tier).

Trustees

appoint

the

Asset

Management

Company

(AMC), to manage investor’s money.

The AMC in return charges a fee for the services provided

and this fee is borne by the investors as it is deducted from the money collected from them.

The AMC’s Board of Directors must have at least 50% of Directors who are independent directors. The AMC has to

be approved by SEBI.

ASSOCIATION OF MUTUAL FUNDS IN

INDIA

ASSOCIATION OF MUTUAL FUNDS IN INDIA  AMFI (Association of Mutual Funds in India) is the

AMFI (Association of Mutual Funds in India) is the industry association for the mutual fund industry in

India which was incorporated in the year 1995. The Principal objective of AMFI are to

Promote the interests of the mutual funds and unit holders

and interact with regulators- SEBI/RBI/Govt./Regulators.

increase

public

awareness

and

understanding

of

To

the

concept and working of mutual funds in the country

To develop a cadre of well trained distributors and to implement a programme of training and certification for all

intermediaries and others engaged in the industry.

TYPES OF MUTUAL FUNDs

TYPES OF MUTUAL FUNDs
TYPES OF MUTUAL FUNDs

TYPES OF MUTUAL FUND SCHEMES

TYPES OF MUTUAL FUND SCHEMES  Open Ended: These are funds that you can buy and

Open Ended: These are funds that you can buy and sell anytime throughout the year.

Close Ended: These are funds that are open only for a specific period after which you'd have to buy them

from the secondary market.

Interval schemes: These schemes combine the features of open ended and close ended schemes and

are available for purchase or sale during a select period

Contd

Contd  By Investment Objective  Equity (Growth) – only in Stocks – Long Term (3

By Investment Objective

Equity (Growth) only in Stocks Long Term (3 years or

more)

Debt (Income) only in Fixed Income Securities (3-10

months)

Liquid/Money Market (including gilt) Short-term Money Market (Govt.)

Balanced/Hybrid Stocks + Fixed Income Securities (1-3 years)

Other Schemes

Tax Saving Schemes

Special Schemes

– Stocks + Fixed Income Securities (1-3 years)  Other Schemes  Tax Saving Schemes 

SPECIAL SCHEMES-EXAMPLE

SPECIAL SCHEMES-EXAMPLE  Funds based on Size of the Companies Invested in  Large cap funds:

Funds based on Size of the Companies Invested in

Large cap funds: Funds that invest in companies whose total market cap is above Rs40bn Mid cap funds: Funds that invest in companies whose market cap is between Rs20-40bn Small cap funds: Funds that invest in companies whose market cap is below Rs20bn

INVESTMENT STRATEGIES

INVESTMENT STRATEGIES  Systematic Investment Plan (SIP)  Invest a fixed sum every month. (6 months

Systematic Investment Plan (SIP)

Invest a fixed sum every month. (6 months to 10 years- through post-dated cheques or Direct Debit facilities) Fewer units when the share prices are high, and more units when the share prices are low. Average cost price

tends to fall below the average NAV.

Systematic Transfer Plan (STP)

Invest in debt oriented fund and give instructions to

transfer a fixed sum, at a fixed interval, to an equity

scheme of the same mutual fund

Investment strategies

Investment strategies  Systematic Withdrawal Plan (SWP)  Here the investor invests a lump sum amount

Systematic Withdrawal Plan (SWP)

Here the investor invests a lump sum amount and withdraws some money regularly over a period of time. This results in a steady income for the investor while at the same time his principal also gets drawn down gradually.

ADVANTAGES OF MUTUAL FUNDS

ADVANTAGES OF MUTUAL FUNDS  Expert on your side: When you invest in a mutual fund,

Expert on your side:

When you invest in a mutual fund, you buy

into the experience and skills of a fund manager and an army of

professional analysts

Limited risk: Mutual funds are diversification in action and hence do not rely on the performance of a single entity.

More for less: For the price of one blue chip stock for instance,

you could get yourself a number of units across a number of

companies and industries when you invest in a fund!

Easy investing: You can invest in a mutual fund with as little as

Rs. 5,000. Salaried individuals also have the option of investing in

a monthly savings plan.

Convenience: You can invest directly with a fund house, or

through your bank or financial adviser, or even over the internet.

Contd

Contd …  Investor protection: A mutual fund in India is registered with SEBI, which also

Investor protection: A mutual fund in India is registered with

SEBI, which also monitors the operations of the fund to protect

your interests.

Quick access to your money: It's good to know that should you need your money at short notice, you can usually get it in four

working days.

Transparency: As an investor, you get updates on the value of

your units, information on specific investments made by the

mutual fund and the fund manager's strategy and outlook.

Low transaction costs: A mutual fund, by sheer scale of its

investments is able to carry out cost-effective brokerage

transactions.

Tax benefits: Over the years, tax policies on mutual funds have

been favorable to investors and continue to be so