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Mutual fund is a trust that pools the savings of a number of investors who share a common
financial goal. This pool of money is invested in accordance with a stated objective. The joint
ownership of the fund is thus Mutual, i.e. the fund belongs to all investors. The money thus
collected is then invested in capital market instruments such as shares, debentures and other
securities. The income earned through these investments and the capital appreciations realized
are shared by its unit holders in proportion the number of units owned by them. Thus a Mutual
Fund is the most suitable investment for the common man as it offers an opportunity to invest in
a diversified, professionally managed basket of securities at a relatively low cost. A Mutual Fund
is an investment tool that allows small investors access to a well-diversified portfolio of equities,
bonds and other securities. Each shareholder participates in the gain or loss of the fund. Units are
issued and can be redeemed as needed. The funds Net Asset value (NAV) is determined each
day.
Investments in securities are spread across a wide cross-section of industries and sectors and
thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the
same direction in the same proportion at the same time. Mutual fund issues units to the investors
in accordance with quantum of money invested by them. Investors of mutual funds are known as
unit holders.
When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets
of the fund in the same proportion as his contribution amount put up with the corpus (the total
amount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unit
holder.
Any change in the value of the investments made into capital market instruments (such as shares,
debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the
market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is
calculated by dividing the market value of scheme's assets by the total number of units issued to
the investors
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Mid-Cap Funds
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Gilt Funds: Invest their corpus in securities issued by Government, popularly known as
Government of India debt papers. These Funds carry zero Default risk but are associated with
Interest Rate risk. These schemes are safer as they invest in papers backed by Government.
Income Funds: Invest a major portion into various debt instruments such as bonds,
minimum exposure in equities. It gets benefit of both equity and debt market. These scheme
ranks slightly high on the risk-return matrix when compared with other debt schemes.
Short Term Plans (STPs): Meant for investment horizon for three to six months. These
funds primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial
Papers (CPs). Some portion of the corpus is also invested in corporate debentures.
Liquid Funds: Also known as Money Market Schemes, These funds provides easy
liquidity and preservation of capital. These schemes invest in short-term instruments like
Treasury Bills, inter-bank call money market, CPs and CDs. These funds are meant for shortterm cash management of corporate houses and are meant for an investment horizon of 1day to 3
months. These schemes rank low on risk-return matrix and are considered to be the safest
amongst all categories of mutual funds.
3. Balanced funds: As the name suggest they, are a 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. These schemes aim to provide investors with the best of both the
worlds. Equity part provide growth and the debt part provides stability in returns.
Hybrid Funds
Equity oriented - Have an equity exposure of more than 60% rest in debt investments.
Debt
oriented
Have
debt
exposure
of
more
than
50%
rest
in
equities.
Monthly income plans - Have equity exposure ranging from 10- 25% and rest in bonds
Further the mutual funds can be broadly classified on the basis of investment parameter viz,
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There are numerous benefits of investing in mutual funds and one of the key reasons for its
phenomenal success in the developed markets like US and UK is the range of benefits they offer,
which are unmatched by most other investment avenues. We have explained the key benefits in
this section. The benefits have been broadly split into universal benefits, applicable to all
schemes, and benefits applicable specifically to open-ended schemes.
1. Professional Management
The investor avails of the services of experienced and skilled professionals who are backed
by a dedicated investment research team which analyses the performance and prospects of
companies and selects suitable investments to achieve the objectives of the scheme.
2. Diversification
Mutual Funds invest in a number of companies across a broad cross-section of industries
and sectors. This diversification reduces the risk because seldom do all stocks decline at the
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same time and in the same proportion. You achieve this diversification through a Mutual
Fund with far less money than you can do on your own.
3.
Convenient Administration
Investing n in a Mutual Fund reduces paperwork and helps you avoid many problems such
as bad deliveries, delayed payments and unnecessary follow up with brokers and
companies. Mutual Funds save your time and make investing easy and convenient.
4. Return Potential
Over a medium to long-term, Mutual Funds have the potential to provide a higher return as
they invest in a diversified basket of selected securities.
5. Low Costs
Mutual Funds are a relatively less expensive way to invest compared to directly investing
in the capital markets because the benefits of scale in brokerage, custodial and other fees
translate into lower costs for investors.
6. Liquidity
In open-ended schemes, you can get your money back promptly at net asset value related
prices from the Mutual Fund itself. With close-ended schemes, you can sell your units on a
stock exchange at the prevailing market price or avail of the facility of direct repurchase at
NAV related prices which some close-ended and interval schemes offer you periodically.
7. Transparency
You get regular information on the value of your investment in addition to disclosure on the
specific investments made by your scheme, the proportion invested in each class of assets
and the fund manager's investment strategy and outlook.
8. Flexibility
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Through features such as regular investment plans, regular withdrawal plans and dividend
reinvestment plans, you can systematically invest or withdraw funds according to your
needs and convenience.
9. Choice of Schemes
Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.
10. Well Regulated
All Mutual Funds are registered with SEBI and they function within the provisions of strict
regulations designed to protect the interests of investors. The operations of Mutual Funds
are regularly monitored by SEBI.
11. Understanding and Managing Risk
All investments whether in shares, debentures or deposits involve risk: share value may go
down depending upon the performance of the company, the industry, state of capital market
and the economy; generally, however longer the term, lesser the risk; companies may
default in payment of interest/principal on their deposits/bonds debentures; the rate of
interest on investment may fall short of the rate of inflation reducing the purchasing power.
While risk cannot be eliminated, skillful management can minimize risk. Mutual fund helps
to reduce risk through diversification and professional management. The experience and
expertise of Mutual Fund managers in selecting fundamentally sound securities and timing
their purchases and sales help them to build a diversified portfolio that minimize risk and
maximizes returns.
12. Tax Benefits
The incomes under Mutual Funds are much more Tax efficient than any fixed income
security due to the following benefits:-
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Section 80L of the income Tax Act ,1961 enables tax free income up to rs 15000
and dividends from MF s are eligible for this benefit.
When you invest for over a year, the tax payable on encashment is Long term
Capitals gains tax at 20%. Once also get an indexation benefit which has been
approximately 8% per year. This reduces the taxable income and thus decreases
the tax liability.
There is also an opportunity to set off capital losses against gains from income
schemes.
Full exemption from capital gains tax as it comes under Section 54EA/EB of the
income tax Act.
One has to pay tax only when he encash units, but have to pay tax on the interest
earned on other debt instruments every year on an accrual basis, even though he
receives the interest later. This generates higher post tax returns compared to other
debt instruments.
Tax is just like a monster that frightens a number of individuals through out the nation. There are
just tow way to fight with this monater:
. Conceal/Depress Income
. Make tax efficient investments.
Perhaps the second option is far better than the first as it gives the peace of mind together with a
feeling that one is a responsible citizen of the nation. With increasing amount of awareness that
is taking birth in the minds of investors, mutual fund has become cynosure of the eye of the
several investors.
The taxes available are tow kinds:
. To the mutual fund- as explained below in No 1
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INVESTMENT CRITERIA
Lower cost
It is a lower cost of investment as compare to other mode of investment option in the market.
Here the investor can invest a minimum of Rs500 in the scheme of ELSS (Equity Link Saving
Scheme).
Less paper work
Here less paper work is require than other. The investor give his detail information like his/her
name,age,address,phone no., pan card no, nominee name and address(in case of minor) and three
full signature of the candided.
No cash Transactions
Investor need not require paying cash, instead of cash investor has to pay cheque or demand
draft. Which help to prevent misappropriation and also save the tax. Here the investor just writes
the product name of mutual fund and sign on it. It also saves the time.
No Age Bar
There is no age bar of investor here any age group can invest in mutual fund. In case of
minor(below 18 year) there is a nominee, so a child can invest through his guardian and a person
having age of 70 also invest in mutual fund ,which is not possible in other investments.
Service or any kind of income group
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A service holder or any kind of income group or a student or unemployed people can invest in
mutual fund but the person is a rational human being having sound knowledge of investment
company.
Dividend Reinvestment: Dividend amount declared is used to buy more units of the
fund.
For example: A fund declared Rs 2 / unit and the NAV is Rs 12. If the investor has 100
original units and has opted for dividend reinvestment he will have: Rs 200/12 = 16.67
units. Total units after the dividend is reinvested = 100 original + 16.67 Units reinvested
= Total 116.67 Units.
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5. Have a demonic watch on the asset management charges. As a fund starts to do well, it
should attract a lot of investors, and as its assets increase it should keep dropping its asset
management charges. Look at well managed funds with charges below 1.9% p.a. - there
are many.
6. Look at the portfolio turnover ratio - the greater the ratio, the more is your total cost. One
cost which is not visible to the investor is the brokerage that the fund scheme pays. This
is a function of the turnover of the portfolio. So a fund with a lower turnover would be
incurring lesser costs.
7. The asset management company's team is important too! Look for experienced teams
where the managers have gone through a few business cycles. Managers who have not
seen a down market can be very myopic, and those managers who have been through a
prolonged slow down very pessimistic. You need a nice blend in the team.
8. True to label: When you buy a large cap fund, you are buying a large cap fund, simple. If
a fund says it is a large cap fund it should not be buying mid cap, small cap etc. just
because large caps are currently out of favor. It is your choice to be in a large cap fund
and your fund manager should respect it.
9. Philosophy matching: Some fund houses are cooler and calmer compared to the others.
See which philosophy suits you. For example Templeton says Franklin India blue chip is
a 'growth' oriented, large cap fund, whereas Templeton India Growth fund is a 'value'
oriented fund - see what suits you. Hdfc mutual fund on the other hand does not classify
itself into 'growth' or 'value' labels.
10. Fund management is by a team or a star fund manager: Fund management is a part
science and part art. The fund manager will surely leave a stamp, however, some fund
houses have been able to create teams and systems to handle the departure of fund
managers - this gives you greater peace of mind. A star fund manager could leave or even
worse just drop dead - and you keep wondering 'now what'! Internationally and in the
Indian context well performing funds (over say 10 years) have seen very stable
management teams and CIOs.
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11. Over extremely large periods of time it is really difficult to beat a well managed index
fund. Currently all fund houses show schemes beating the index, but beware of
mathematics! All fund houses put a small * and say calculation does not include loads.
Do a small calculation if loads are included just too many schemes would have under
performed the indices. So if you are not looking for too much excitement look for a index
fund with fund charges south of 1% per annum.
12. Index funds with the Sensex as a benchmark are at least theoretically supposed to be
more aggressive than an index fund with nifty as the benchmark. Frankly it does not
matter - if in doubt split your investment amount. The co-relation between nifty and
Sensex is quite high.
13. When selecting a large cap equity fund choose ones with as broad a benchmark as
possible. It is better to choose a fund with CNX 500 as a benchmark rather than say the
Sensex. Fund managers may have a greater flexibility between large caps, small caps, etc.
14. Do not chase performance. The fund which has performed well in one quarter may not
perform well in the next quarter. Funds with a good long term top quartile performance is
far superior than to a fund scheme which has one top position and one bottom position.
Remember long term investing is like running a marathon - stamina is more important
than speed.
15. At the top in the well run large cap funds are Hdfc top 200, Dsp top 100, Principal Large
cap fund, Franklin India blue chip, and Hdfc Equity fund come to attention. This list is
not exhaustive and many fund distributors and banks have their own favorites. This list
passes the test prescribed above - of good consistent returns, good long term
performance, team going through a bull phase and a bear phase, true to label, etc.
Importantly as the fund size has increased these schemes have reduced the asset
management charges and thus improved the total return to the investor.
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to
get
such
mails
because
systematic
investments in mutual funds are the best way to turn savings into efficient investment vehicles.
In this article, let me talk about a simple method to construct a good SIP portfolio.
1. First, decide upon the asset allocation - By asset allocation what I mean is how much money
goes every month into what kind of mutual fund. It is possible to get very complicated with this,
but to keep it simple you can focus on just three types of funds - large-cap oriented funds,
small/mid-cap funds and debt funds. A typical allocation would be 50% in large-cap oriented
funds, 20-30% in small-mid/cap oriented funds, and the rest in debt funds. To ensure stable and
optimal returns, every SIP portfolio should have some debt fund component in it. It can just be a
small portion - 20-25% of the monthly investment, if your portfolio is an aggressive portfolio for
the long term.
2. Second, decide upon the number of schemes in your portfolio - Given the fact that we have
three prime asset classes as above, your portfolio should have at least three schemes in it. On the
upper side, it should not have more than seven-eight schemes. More than that, and your portfolio
becomes difficult to track and manage. Ideally, a portfolio would have five schemes - four equity
schemes, and one debt scheme.
3. Third, decide on the schemes - this is the last thing to do while designing the portfolio, not the
first. Once you know what kind of schemes you are looking for and how many of each kind
(from steps 1 and 2 above), this step becomes a simple choice. You can go to research websites
like valueresearchonline.com or Mint 50 and look at their top rated funds. You can simply pick
one or two in each class that you are interested in and you'll have your portfolio ready!
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Let us take a simple example and walk through the process to illustrate. Suppose you want to
invest Rs. 10,000 a month in a moderately risky portfolio of mutual fund schemes for the next 35 years. We can decide to go with a 70% equity, 30% debt portfolio. In equity, we can decide to
have 50% large-cap oriented allocation and 20% small-mid-cap oriented allocation. We will need
two large-cap oriented schemes (Rs. 2,500 each), one small/mid-cap scheme (Rs. 2000) and one
debt scheme (Rs. 3000) to invest in.
Asset class
Number of
Total SIP
schemes
amount
Large-cap equity 2
Scheme choices
Rs. 5,000
Small/Mid-cap
Rs. 2,000
ICICI Discovery
equity
Debt
Rs. 3,000
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As we can see, putting together a well-diversified, balanced portfolio such as this is very easy. A
regular, systematic investment done for the long run in such a portfolio would be a great way for
investors to convert their monthly savings into a great investment portfolio.
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Credit Risk: Bonds of a particular company being downgraded by the rating agencies cause
lower prices.
The best thing about mutual fund is that in reality most if not all financial instruments carry these
risks but public is ignorant about it. For example, bank deposits are guaranteed only up to one
lakh rupees. Company FDs carry default risks. Price risk is the only additional risk of investing
in a MF. This is true for any investment that has a market price (Real estate, Shares, Gold, etc.,).
If there are risks with mutual funds, can only people with high-risk tolerance invest in it?
No. The biggest risk is not investing at all, as inflation erodes the value of money and the future
looks far from certain. Hence proper risk taking and planning are essential.
There are ways and means to mitigate the risks:
Have adequate exposure to debt assets outside of MFs such as FDs, Govt bond such as
PPF, POMIS, NSC, RBI Bonds etc.,
BY INVESTMENT OBJECTIVE
Growth Schemes: Growth Schemes are also known as equity schemes. The aim of these
schemes is to provide capital appreciation over medium to long term. These schemes normally
invest a major part of their fund in equities and are willing to bear short-term decline in value for
possible future appreciation.
Income Schemes: Income Schemes are also known as debt schemes. The aim of these
schemes is to provide regular and steady income to investors. These schemes generally invest in
fixed income securities such as bonds and corporate debentures. Capital appreciation in such
schemes may be limited.
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Balanced Schemes: Balanced Schemes aim to provide both growth and income by
periodically distributing a part of the income and capital gains they earn. These schemes invest in
both shares and fixed income securities, in the proportion indicated in their offer documents
(normally 50:50).
Money Market Schemes: Money Market Schemes aim to provide easy liquidity,
preservation of capital and moderate income. These schemes generally invest in safer, short-term
instruments, such as treasury bills, certificates of deposit, commercial paper and inter-bank call
money.
OTHER SCHEMES
Tax Saving Schemes: Tax-saving schemes offer tax rebates to the investors under tax
laws prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions made to
any Equity Linked Savings Scheme (ELSS) are eligible for rebate.
Index Schemes: Index schemes attempt to replicate the performance of a particular index
such as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only those
stocks that constitute the index. The percentage of each stock to the total holding will be identical
to the stocks index weightage. And hence, the returns from such schemes would be more or less
equivalent to those of the Index.
Sector Specific Schemes: These are the funds/schemes which invest in the securities of only
those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, Software,
Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are
dependent on the performance of the respective sectors/industries. While these funds may give
higher returns, they are more risky compared to diversified funds. Investors need to keep a watch
on the performance of those sectors/industries and must exit at an appropriate time
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time or the expertise to manage their own portfolio. A mutual fund is considered to be relatively
less expensive way to make and monitor their investments.
2. Diversification - Purchasing units in a mutual fund instead of buying individual stocks or
bonds, the investors risk is spread out and minimized up to certain extent. The idea behind
diversification is to invest in a large number of assets so that a loss in any particular investment
is minimized by gains in others.
3. Economies of Scale - Mutual fund buy and sell large amounts of securities at a time, thus help
to reducing transaction costs, and help to bring down the average cost of the unit for their
investors.
4. Liquidity - Just like an individual stock, mutual fund also allows investors to liquidate their
holdings as and when they want.
5. Simplicity - Investments in mutual fund is considered to be easy, compare to other available
instruments in the market, and the minimum investment is small. Most AMC also have automatic
purchase plans whereby as little as Rs. 2000, where SIP start with just Rs.50 per month basis.
4. Taxes - when making decisions about your money, fund managers don't consider your
personal tax situation. For example, when a fund manager sells a security, a capital-gain tax is
triggered, which affects how profitable the individual is from the sale. It might have been more
advantageous for the individual to defer the capital gains liability.
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A mutual fund is a company that pools investors' money to make multiple types of investments,
known as the portfolio. Stocks, bonds, and money market funds are all examples of the types of
investments that may make up a mutual fund.
The mutual fund is managed by a professional investment manager who buys and sells
securities for the most effective growth of the fund. As a mutual fund investor, you become a
"shareholder" of the mutual fund company. When there are profits you will earn dividends. When
there are losses, your shares will decrease in value.
Mutual funds are, by definition, diversified, meaning they are made up a lot of different
investments. That tends to lower your risk (avoiding the old "all of your eggs in one basket"
problem).
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Because someone else manages them, you don't have to worry about diversifying individual
investments yourself or doing your own record keeping. That makes it easier to just buy them
and forget about them. That's not always the best strategy, however -- your money is in someone
else's hands, after all.
Since the fund manager's compensation is based on how well the fund performs, you can be
assured they will work diligently to make sure the fund performs well. Managing their fund is
their full-time job!
Mutual funds can be open-ended or closed-ended. But many people consider all mutual funds to
be open-ended, while putting closed-ended funds in another category.
"Open-ended" means that shares are issued in the fund (or sold back to the fund) whenever
anyone wants them. With closed-ended funds, only a certain number of shares can be issued for a
particular fund, and they can only be sold back to the fund when the fund itself terminates. (You
can sell closed-ended funds to other investors on the secondary market, though.)
Load refers to the sales charges added to a mutual fund when you purchase it. The load charge
goes to the fund salesperson as a commission and payment for their research services. Load
charges can be up to 8.5 percent of the selling price and can be figured in as a front-end load
(meaning you pay it when you buy the mutual fund) or a back-end load (meaning you pay when
you sell the mutual fund).
Many mutual funds are no-load funds. Yes, that means there is no sales fee charged and the fund
is direct-marketed so you can buy it without the help of a salesperson. With the wealth of
information on the Internet today, it is certainly easier to make smart choices yourself to save
money.
In addition to no-load funds, there are also funds that charge up to 3.5 percent as a sales fee.
These are called low-load funds and can still be a good deal.
Mutual funds fall into three categories:
Equity funds are made up of investments of only common stock. These can be riskier
(and earn more money) than other types.
Fixed-income funds are made up of government and corporate securities that provide a
fixed return and are usually low risk.
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Balanced funds combine both stocks and bonds in the investment pool and offer a
moderate to low risk. While low risk may sound good, it is also accompanied by lower
rates of return-meaning you risk less, but your investment won't earn as much. You have
to decide how much risk you're willing to take on before you invest your money.
If you have invested in a college savings fund or a 401k account, chances are good that already
own a few mutual funds. Mutual funds are great for long-term investments like these. You can
also buy mutual funds directly from a mutual fund company.
Most of these offer no-load funds (or sometimes low-load funds). You can find lists of mutual
fund companies on the Internet and purchase shares by simply filling out an application and
mailing a check. Once you are a shareholder, you will receive statements telling you how the
fund is doing as well as how much your own investment is growing. You can also set up monthly
bank transfers to automatically buy more shares every month.
Remember to do your research and select a mutual fund that fits the level of risk you are willing
to take with your hard-earned cash. Then just sit back and hope for the best!
diversification and
a portfolio of
income
securities
spreading
of
belonging
risk by investing
to industries having
inversely
in
correlated
streams.
Economies of Scale: Since mutual funds buy and sell a large amount of securities at a time, its
transaction costs are lower than what an individual investor would pay for trading in
securities. Also, because of the pooling of funds, individual investors can make investments in
small denominations in the securities market which is not possible if they invest on their own.
Liquidity: Just like an individual stock, a mutual fund allows its investors to readily redeem
their shares at the current NAV plus any fees and charges assessed on redemption at
any time. The price per share at which the investors can redeem shares is known as the funds
net asset value (NAV). NAV is the current market value of all the funds assets, minus
liabilities, divided by the total number of outstanding shares.
Convenience: An investor can purchase or sell fund shares directly from a fund or through a
broker, financial planner, bank or insurance agent, by mail, over the telephone, and
increasingly by personal computer. He can also arrange for automatic reinvestment or
periodic distribution of the dividends and capital gains paid by the fund. Funds may offer a
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wide variety of other services, including monthly or quarterly account statements, tax
information, and 24-hour phone and computer access to fund and account information.
Protecting Investors: Not only are mutual funds subject to compliance with their selfimposed restrictions and limitations, they are also highly regulated by the federal government
through the U.S. Securities and Exchange Commission (SEC). As part of this government
regulation, all funds must meet certain operating standards, observe strict antifraud rules, and
disclose complete information to current and potential investors. These laws are strictly
enforced and designed to protect investors from fraud and abuse.
HOW TO READ A MUTUAL FUND TABLE
Columns 1 & 2: 52 Week Hi and Low These show the highest and lowest prices the
mutual fund has experienced over the previous 52-weeks (one year). This typically does not
include the previous day's price.
Column 3: Fund Name This column lists the name of the mutual fund. The company that
manages the fund is written above in bold type.
Column 4: Fund Specifics Different letters and symbols have various meanings. For
example, "N" means no load, "F" is front end load, and "B" means the fund has both front and
back-end fees.
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Column 5: Dollar Change This states the dollar change in the price of the mutual fund
from the previous day's trading.
Column 6: % Change This states the percentage change in the price of the mutual fund
from the previous day's trading.
Column 7: Week High This is the highest price the fund traded at during the past week.
Column 8: Week Low This is the lowest price the fund traded at during the past week.
Column 9: Close The last price at which the fund was traded is shown in this column.
Column 10: Week's Dollar Change This represents the dollar change in the price of the
mutual fund from the previous week.
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76
LIQUID FUND
Inception Date
Option/Plan
Type of Instruments
Normal
Normal
Allocation
Allocation
(% of Net Asset)
(% of Net Asset)
Risk Profile
00
Medium to high
00
Low to medium
instruments
Debt Securities, Money
2
Market
instruments
&
Cash
00-20
Returns
HDFC Growth (NAV as at evaluation date, Rs. 53.472
78
Fund
Per unit)
Date
Period
NAV
Returns(%) $ Benchmark
45.461
$^
Returns(%)#
13.81**
2.37**
-32.88*
-33.38*
2007
days)
-2.22**
-8.07**
27.97**
23.21**
37.58**
30.1**
N.A.
15.25**
23.96**
14.44**
days)
June 30, 2003
September
2000
days)
Absolute
Due
Returns
to
an
**
over
Compounded
all
sharp
Annualised
rise
in
Returns
the
#
stock
SENSEX
prices
NAV Date
NAV value
Dividentd plan
18 Aug 2008
29.0270
Growth plan
18 Aug 2008
58.9370
SIP Returns
SIP Investments
Since Inception
79
5 Year
3 Year
1 Year
94,000.00
60,000.00
36,000.00
12,000.00
338,680.64
115,755.39
43,748.58
9,857.36
Returns (Annualised)*%
31.84%
26.64%
13.10%
-31.44%
Benchmark Returns
22.77%
20.64%
6.77%
-36.15%
# SENSEX
Benchmark - BSE Sensex
Disclaimer: The above investment simulation is for illustrative purposes only and should not be
construed as a promise on minimum returns and safeguard of capital. The AMC / Mutual Fund is
not guaranteeing or promising or forecasting any returns. SIP does not assure a profit or
guarantee protection against a loss in a declining market. Please refer SIP Enrolment Form or
contact nearest ISC for SIP Load Structure
HDFC TOP-200 FUND
Investment Objective
The investment objective is to generate long term capital appreciation from a portfolio of equity
and equity linked instruments. The investment portfolio for equity and equity linked instruments
will be primarily drawn from the companies in the BSE 200 Index. Further, the Scheme may also
invest in listed companies that would qualify to be in the top 200 by market capitalization on the
BSE even though they may not be listed on the BSE This includes participation in large IPOs
where in the market capitalization of the company based on issue price would make the company
a part of the top 200 companies listed on the BSE based on market capitalization
Basic Scheme Information
Nature of Scheme
Inception Date
80
Option/Plan
Plan Name
NAV Date
NAV Amount
Dividend Plan
18 Aug 2008
38.29
Growth Plan
18 Aug 2008
129.56
Investment Pattern
The Scheme may also invest upto 25% of net assets of the Scheme in derivatives such as Futures
& Options and such other derivative instruments as may be introduced from time to time for the
purpose of hedging and portfolio balancing and and other uses as may be permitted under the
regulations and guidelines.
The Scheme may also invest a part of its corpus, not exceeding 40% of its net assets, in overseas
markets in Global Depository Receipts (GDRs), ADRs, overseas equity, bonds and mutual funds
and such other instruments as may be allowed under the Regulations from time to time.
Returns
HDFC Top 200 (NAV as at evaluation date, Rs. 115.424
Fund
Per unit)
Date
Period
NAV
104.504
2007
days)
120.34
81
Returns(%) $ Benchmark
$^
Returns(%)#
8.24**
4.45**
-31.25*
-37.53*
-4.06**
-8.85**
26.23**
21.2**
37.6**
29.43**
27.12**
17.55**
25.3**
15.18**
days)
June 30, 2003
SIP Returns
SIP Investments
Since
10 Year
5 Year
3 Year
1 Year
120,000.0
60,000.00
36,000.0
12,000.0
0
9,843.01
Inception
Total
Amount
Invested 141,000.00
(Rs.)
580,129.0
113,375.0
41,661.2
30, 2008
Returns (Annualised)*%
27.85%
29.65%
25.77%
9.73%
-31.64%
Benchmark Returns
18.32%
20.25%
18.90%
5.82%
-38.40%
Inception Date
Option/Plan
Plan Name
NAV Date
NAV Amount
Dividend Plan
18 Aug 2008
36.1630
Growth Plan
18 Aug 2008
156.7660
Investment Strategy:
In order to provide long term capital appreciation, the Scheme will invest predominantly in
83
growth companies. Companies selected under this portfolio would as far as practicable consist of
medium to large sized companies which:
The aim will be to build a portfolio, which represents a cross-section of the strong growth
companies in the prevailing market. In order to reduce the risk of volatility, the Scheme will
diversify across major industries and economic sectors
Investment Pattern
The asset allocation under the Scheme will be as follows :
Sr.No.
Asset Type
(% of Portfolio)
Risk Profile
80 - 100
Medium
to
High
2
0 - 20
Low
to
Medium
Investment in Securitised debt, if undertaken, would not exceed 20% of the net assets of the
scheme.
The Scheme may also invest upto 25% of net assets of the Scheme in derivatives such as Futures
& Options and such other derivative instruments as may be introduced from time to time for the
purpose of hedging and portfolio balancing and other uses as may be permitted under the
Regulations.
The Scheme may also invest a part of its corpus, not exceeding 40% of its net assets, in overseas
markets in Global Depository Receipts (GDRs), ADRs, overseas equity, bonds and mutual funds
84
and such other instruments as may be allowed under the Regulations from time to time. Also
refer to the Section on Policy on off-shore Investments by the Scheme(s).
If the investment in equities and related instruments falls below 70% of the portfolio of the
Scheme at any point in time, it would be endeavoured to review and rebalance the composition.
Not with standing anything stated above, subject to the regulations, the asset allocation pattern
indicated above may change from time to time, keeping in view market conditions, market
opportunities, applicable regulations and political and economic factors. It may be clearly
understood that the percentages stated above are only indicative and are not absolute and that
they can vary substantially depending upon the perception of the AMC, the intention being at all
times to seek to protect the NAV of the scheme. Such changes will be for short term and
defensive considerations. Provided further and subject to the above, any change in the asset
allocation affecting the investment profile of the Scheme and amounting to a change in the
Fundamental Attributes of the Scheme shall be effected in accordance with sub-regulation (15A)
of regulation 18 of SEBI regulations.
Returns
HDFC
Fund
Per unit)
Date
Period
NAV
142.602
2007
days)
Last
1 Year
(367 165.313
Returns(%) $ Benchmark
$^
Returns(%)#
0.32**
1.47**
-34.88*
-39.38*
-13.33**
-11.59**
24.71**
18.87**
36.68**
29.03**
days)
June 30, 2005
85
days)
June 30, 1998
34.67**
17.75**
21.78**
9.22**
days)
January
1995
*
Absolute
days)
Returns
**
Compounded
Annualised
Returns
S&P
CNX
500
SIP Returns
SIP Investments
Since
10 Year
5 Year
3 Year
1 Year
120,000.0
60,000.00
36,000.0
12,000.0
(Rs.)
646,490.6
107,904.1
38,998.6
9,408.57
30, 2008
Inception
Returns (Annualised)*%
29.53%
31.66%
23.71%
5.27%
-37.52%
Benchmark Returns
16.18%
19.77%
17.56%
3.25%
-40.27%
Disclaimer:
The above investment simulation is for illustrative purposes only and should not be construed as
a promise on minimum returns and safeguard of capital. The AMC / Mutual Fund is not
guaranteeing or promising or forecasting any returns. SIP does not assure a profit or guarantee
protection against a loss in a declining market. Please refer SIP Enrolment Form or contact
nearest ISC for SIP Load Structure.
HDFC Infrastructure Fund
86
Investment Objective
To seek long-term capital appreciation by investing predominantly in equity and equity related
securities of companies engaged in or expected to benefit from growth and development of
infrastructure.
Inception Date
Option/Plan
Plan Name
NAV Date
NAV Amount
Growth Option
18 Aug 2008
8.3830
Dividend Option
18 Aug 2008
8.3830
Investment Pattern:
The asset allocation under the respective Plans will be as follows:
Type of Instruments
Minimum
Maximum
Net Assets)
Net Assets)
100%
Medium to High
35%
Medium to High
35%
Low to Medium
of
infrastructure
infrastructure
related
companies
Equity and Equity Related 0%
Instruments of companies
other than mentioned above
Debt Securities and Money 0%
Market Instruments* and
Fixed Income Derivative ;
* Investments in securitised debt shall not normally exceed 30% of the net assets of the Scheme.
The Scheme may seek investment opportunity in Foreign Securities (max. 35% of net assets).
The Scheme may take derivatives position for hedging, portfolio balancing or to undertake any
other strategy as permitted under SEBI Regulations from time to time (max. 20% of the net
assets) based on the opportunities available subject to SEBI Regulations.
Returns
HDFC
Infrastructure Fund
Date
Period
NAV
Returns(%) $ Benchmark
$^
Returns(%)#
N.A
N.A.
1.47**
N.A.
-39.38*
N.A.
-11.59**
days)
June 29, 2007
Last
1 Year
(367 N.A
88
days)
June 30, 2005
N.A.
18.87**
N.A.
29.03**
N.A.
17.75**
-25.2*
-18.45*
days)
June 30, 2003
* Absolute Returns
~
Due
to
an
over
all
sharp
rise
in
the
prices
Inception Date
Option/Plan
89
Returns
HDFC Prudence (NAV as at evaluation date, Rs. 112.678
Fund
Per unit)
Date
Period
NAV
Returns(%) $ Benchmark
$^
Returns(%)#
110.132
1.84**
6.01**
160.6870
-29.88*
-22.7*
124.716
-9.6**
-1.33**
20.3**
15.38**
42.37**
19.31**
26.8**
N.A.
20.41**
N.A.
2007
June 29, 2007
February 1, 1994
* Absolute Returns
90
$$ Adjusted for the dividends declared under the scheme prior to its splitting into the Dividend
and Growth Plan
Investment Strategy
As outlined above, the investments in the Scheme will comprise both debt and equities. The
Fund would invest in Debt instruments such as Government securities, money market
instruments, securitised debts, corporate debentures and bonds, preference shares, quasi
Government bonds, and in equity shares. In the long term, the mix between debt instruments and
equity instruments is targeted between 60:40 and 40:60 respectively. The exact mix will be a
function of interest rates, equity valuations, reserves position, risk taking capacity of the portfolio
without compromising the consistency of dividend pay out (in the case of Dividend Plan), need
for capital preservation and the need to generate capital appreciation.
Investment Pattern
The
following
table
provides
the
asset
allocation
of
the
Scheme's
portfolio.
Type of Instruments
Normal
Risk Profile
Allocation
(% of Net Assets)
40 - 75%
Medium
to
High
2
Debt
Securities,
Money
Market 25 - 60%
Low
to
Medium
(Investment in Securitised debt, if undertaken,would not exceed 10% of the net assets of the
Scheme.)
HDFC Capital Builder Fund
HDFC Capital Builder Fund, an open-ended growth scheme, aims to invest in strong
91
companies at prices that below fair value in the opinion of the fund managers. The investment
approach is based on the philosophy that value may be uncovered only where the crowd has not
discovered it yet. In the opinion of the fund managers such value exists in good quality well
managed neglected stocks. The current neglect in these companies by the broad market
participants can be due to various factors such as difficult recent market conditions, major
restructuring charges, VRS expenses or other such one time effects that may subdue profits in the
near term. This also usually results in the shares of such companies being relatively illiquid.
While assuming such relative risk adjusted liquidity risk the fund managers propose to
capitalize on expected pick up reported earning as result of strong growth prospects in the future.
This eventually translates in to more liquidity depending on the success of this strategy. Such
opportunities are available in large companies as well as small companies. While there is no
criteria for stock selection based on market capitalization the endeavor is to keep a balance of
companies in the portfolio between big and small companies, on one category overwhelming the
other
Basic Scheme Information
Nature of Scheme
Inception Date
Option/Plan
Plan Name
Dividend Plan
18
22.075
Aug
2008
Growth Plan
18
69.918
Aug
2008
92
Investment Pattern
The asset allocation under the Scheme will be as follows :
Sr.No.
Asset Type
(% of Portfolio)
Risk Profile
Upto 100%
Medium to High
Not
more
20%
Investment in Securitised debt, if undertaken, would not exceed 20% of the net assets of the
scheme.
The Scheme may also invest upto 25% of net assets of the Scheme in derivatives such as Futures
& Options and such other derivative instruments as may be introduced from time to time for the
purpose of hedging and portfolio balancing and other uses as may be permitted under the
regulations and guidelines.
The Scheme may also invest a part of its corpus, not exceeding 40% of its net assets, in overseas
markets in Global Depository Receipts (GDRs), ADRs, overseas equity, bonds and mutual funds
and such other instruments as may be allowed under the Regulations from time to time. Also
refer to the Section on Policy on off-shore Investments by the Scheme(s).
SIP Returns
SIP Investments
Since
10 Year
5 Year
3 Year
1 Year
120,000.0
60,000.00
36,000.0
12,000.0
Inception
Total
(Rs.)
Amount
Invested 173,000.00
93
463,752.0
103,349.4
37,539.3
30, 2008
9,242.16
Returns (Annualised)*%
20.51%
25.51%
21.92%
2.74%
-39.73%
Benchmark Returns
15.04%
19.77%
17.56%
3.25%
-40.27%
Builder Fund
Date
Period
NAV
Last
Six
60.3
months 105.1230
Returns(%) $ Benchmark
$^
Returns(%)#
5.08**
1.47**
-38.96*
-39.38*
-12.36**
-11.59**
19.62**
18.87**
37.32**
29.03**
23.96**
17.75**
13.76**
7.95**
(185 days)
June 29, 2007
February 1, 1994
Since
Inception 10.000
(5263 days)
94
*
#
Absolute
Returns
S&P
**
Compounded
CNX
Annualised
Returns
500
FINDINGS
95
In India Mutual fund Industry has seen Dramatic improvements in Quality as well as quality of
products and services offering over the past decade, but the industry has witnessed growth in the
last 10 years considerably below potential. The Asset under Management have grown from about
Rs. 470 billion in march 1993 to Rs. 1,540 billion in April 2004(CAGR of 11.4 percent) & now it
grown to Rs. 5,620 billion till sep 2008. This has mainly achieved due to collection through
mutual fund IPOs that has been increasing due to the investors feeling that it is cheaper in its
IPO stage on account of its Rs. 10 NAV.
There has been a strong appreciation in equities in comparison to the debt market, which has
shown a downward trend last year. And in turn Mid-cap and diversified funds have delivered the
highest in comparison to other funds. As the Indian economy is showing a growing trend with
GDP more than 6% and expected to show 8% and Indian household saving being 24% of the
entire GDP. There is a strong growth potential of Mutual fund industry in India.
In Orissa i.e. rural area it is still a new concept so it will take some more time to really penetrate
into this market apart from people who are HNIs though these people are given more emphasis
by all the Mutual funds and distribution channels. With the introduction of SIPs the industry has
created some options clear for retail investors to enter this market. My survey says that it the
awareness level that is playing acting as an obstacle in the growth of Mutual fund Industry in
Orissa as a whole.
96
HDFC Mutual Fund does not provide monthly income scheme which other mutual
funds have and performance is very appreciable.
8. Fund Managers have suggested HDFC prudence ,HDFC Taxsaver , HDFC Equity for
investment , For the top 5.
9. HDFC Prudence is performing good with comparition to the prudence fund of any other
mutual fund house.
10. At this period of time when market condition is not so good, it is better for investors to
invest through Systamatic Investment plan. Which reduces the market risk.
97
98
CONCLUSION
The global financial market has transformed from Sellers market to Buyers market with
liberalization, Globalizations and privatization. The Indian mutual fund market has also become
global when foreign funds entered, they came up with probably best marketing strategies to beat
Indian giants like BIRLA, HDFC, and ICICI have come up with aggressive strategies to beat the
foreign funds. Now the cutthroat competition goes on and on.
HDFC Mutual funds have rewarded investors with hand some returns. The good news is that this
is poised to become a trend. The mutual funds have strengthened their distribution networks,
become more transparent and investor friendly and are rewarding investors. The mutual fund is
finally, proving itself as a vehicle of safety for investments. But it is still the fund managers
investment philosophy that makes the difference between the winner and the losers.
Careful market analysis, consumer segmentation, identification of investor needs, service
designing are to be carried out for the successful implementation of different schemes by mutual
fund organizations. Regulatory measures by SEBI should be clearly explained to the investors.
Positioning of the schemes and their branding will help a lot for growth of the industry.
Creativity and innovation are the means of marketing in the days to come for Indian mutual fund
market.
99
BIBLIOGRAPHY
www.google.com
WWW.HDFCFUND.COM
http://www.hdfcfund.com/AboutUs/
http://www.hdfcfund.com/Products/
100