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    Mutual Funds: Mrs - Lalitha PPM

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    Priyanka Mallick
    Mutual funds pool money from investors and invest in different securities like stocks and bonds. The net asset value (NAV) is the market value of a unit after accounting for expenses. Loads are fees charged to investors. Expense ratios are ongoing operating fees expressed as a percentage of assets. Mutual funds offer professional management, diversification, liquidity and other benefits. Investors should consider their objectives, asset allocation, fund performance, costs and taxes when selecting funds. Systematic investment plans (SIPs) promote disciplined investing.

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    Mutual Funds: Mrs - Lalitha PPM

    Uploaded by

    Priyanka Mallick
    26 views25 pages
    Mutual funds pool money from investors and invest in different securities like stocks and bonds. The net asset value (NAV) is the market value of a unit after accounting for expenses. Loads are fees charged to investors. Expense ratios are ongoing operating fees expressed as a percentage of assets. Mutual funds offer professional management, diversification, liquidity and other benefits. Investors should consider their objectives, asset allocation, fund performance, costs and taxes when selecting funds. Systematic investment plans (SIPs) promote disciplined investing.

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    Mutual funds pool money from investors and invest in different securities like stocks and bonds. The net asset value (NAV) is the market value of a unit after accounting for expenses. Loads are fees charged to investors. Expense ratios are ongoing operating fees expressed as a percentage of assets. Mutual funds offer professional management, diversification, liquidity and other benefits. Investors should consider their objectives, asset allocation, fund performance, costs and taxes when selecting funds. Systematic investment plans (SIPs) promote disciplined investing.

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    26 views25 pages

    Mutual Funds: Mrs - Lalitha PPM

    Uploaded by

    Priyanka Mallick
    Mutual funds pool money from investors and invest in different securities like stocks and bonds. The net asset value (NAV) is the market value of a unit after accounting for expenses. Loads are fees charged to investors. Expense ratios are ongoing operating fees expressed as a percentage of assets. Mutual funds offer professional management, diversification, liquidity and other benefits. Investors should consider their objectives, asset allocation, fund performance, costs and taxes when selecting funds. Systematic investment plans (SIPs) promote disciplined investing.

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    Mutual Funds

    By
    Mrs.Lalitha PPM
    What is Mutual Fund?
    • A Mutual Fund is an investment vehicle that
    pools the money of several investors and invests
    it in different securities.
    Organisation of Mutual Fund
    Some Concepts Clarified…..
    • NAV - Net asset value is the market value of a unit of
    a scheme after accounting for all expenses on any
    given business day.

    • Load
    Load
    • Charged directly to the investor
    • Includes Agent’s commission, Marketing and
    Selling expenses
    • Front end Load and Back end Load
    • Entry loads vary between 1.00% and 2.5%.
    • Exit loads vary between 0.25% and 3.00%.
    • Regulations do not allow either front-end load or
    back-end load in any combination to be higher
    than 6%.
    …….Some Concepts Clarified
    • Purchase price is the price paid by a customer to
    purchase a unit of the fund.
    • Redemption price is the price received by the
    customer on selling units of an open-ended scheme to
    the fund.
    • Repurchase price is different from redemption price
    and refers to the price at which a close-ended scheme
    repurchases its units.
    • Expense ratio
    Expense Ratio
    • Operating Expenses paid out of the fund’s earnings
    • Includes advisory fees paid to investment managers, audit fees,
    custodial fees, transfer agent fees, trustee fees etc.
    • Advisory fees range from 1% to 1.5% of the corpus
    • Limits mandated by SEBI
    • First Rs. 100 crores 2.50% 2.25%
    • Next Rs. 300 crores 2.25% 2.00%
    • Next Rs. 300 crores 2.00% 1.75%
    • On the balance of assets 1.75% 1.50%
    • The annual expense expressed a percentage of the fund's average
    daily net assets.
    Exploding a Myth-A Fund with lower NAV is
    cheaper than that with higher NAV

    • A Mutual Fund with lower NAV will give better returns !!!!!!
    Existing
    New scheme scheme with
    with NAV at par NAV at Rs. 5 0

    Rs Rs.
    NAV 10 50
    Your investment 1,0 0 0,0 0 0 1,0 0 0,0 0 0
    No. of units allotted to you 1 0 0,0 0 0 2 0,0 0 0
    Market Value of Assets after one year 1 2 0,0 0 0,0 0 0 6 0 0,0 0 0,0 0 0
    Corresponding NAV after one year 12 60
    Current value of your investment 1,2 0 0,0 0 0 1,2 0 0,0 0 0
    Return on investment 2 0% 2 0%
    Classification Of Mutual Fund
    • By Asset Class
    • By Investment Sector
    • By Liquidity
    • By Trading Strategy
    • By Investment Strategy
    • By Security Selection
    • By Load Charged / Cost
    • By Place of origin
    WHY Choose Mutual Funds?
    • Professional Management
    • Lower Risk
    • A better portfolio for less Money
    • Lower Transaction Cost
    • Liquidity
    • Transparency
    • Affordability
    • Choice of Schemes
    • Well Regulated
    Ground Rules of Mutual Fund Investing

    • Define your Investment Objectives


    • Draw up your Asset Allocation

    Equity Balance MIPs Debt Fixed Total Total


    MF d MF MF Inc. Equity Debt
    Below 3 0 5 0% 3 0% 5% 5% 1 0% 7 0% 3 0%
    3 0- 4 5 4 0% 3 0% 1 5% 5% 1 0% 6 0% 4 0%
    4 5- 5 5 2 5% 2 5% 2 5% 5% 2 0% 4 5% 5 5%
    Above 5 5 5% 1 0% 4 0% 5% 4 0% 1 5% 8 5%
    ….Ground Rules of Mutual Fund
    Investing
    • Identify Funds with matching Investment objectives.
    • Evaluate Past Performance, look for Consistency
    • Diversify
    • Consider Fund Costs
    • Factor Tax Implications
    Tax Implications – on Dividend
    Mutual TDS Dividend
    Fund Distribution
    Scheme Tax
    Debt Oriented Nil 12.5% +
    Scheme Surcharge +
    Cess ->
    14.025%
    Equity Oriented Nil Nil
    Scheme
    Tax Implications – on Capital
    Gains
    TAX Debt Oriented Equity Oriented
    Scheme Scheme
    STT Nil 0.2 %
    STCG Marginal Rate 10 %
    of Taxation
    LTCG Lower of NIL
    - 10% without
    indexation
    - 20% with
    indexation
    Which Option to Choose?
    Mutual Fund Scheme Dividend Payout Growth
    Debt Oriented
    Scheme
    -< 1 Year 14.025 % <30%
    - >1 Year 10%or20%
    (WI)<14.025%
    Equity Oriented
    Scheme
    -< 1 Year 0% < 10%
    - > 1 Year Profit Booking
    ….Ground Rules of Mutual Fund
    Investing
    • Look for Size and Credentials
    • Customer Service
    • Monitor regularly and Review
    • Invest Regularly
    When To Sell Mutual Funds?
    • The Fund Manager leaves
    • Below par performance for the last 2 years
    • Size of the corpus increases too fast
    • The Promoter of Mutual Fund is going through
    financial difficulties
    • The scheme changes its investment objectives
    • You change your plan
    • Enough has been earned
    Systematic Investment Plan(SIP)

    Advantages
    • Disciplined investing
    • Convenience
    • Avoiding market prediction
    • Rupee Cost Averaging
    Rupee Cost Averaging
    •  
    Advantages of Early Investing
    Investing in a @ 35 Yrs @ 40 Yrs
    Diversified MF -
    SIP
    Monthly IRS 5000 IRS 5000
    Investment
    Investment 60 Yrs 60 yrs
    Stopped @
    Total IRS 15,00,000/= IRS 12,00,000/=
    Contribution
    Growth (assume IRS IRS
    15 % CAGR) 1,37,82,803.88/= 66,35,367.20/=
    Mutual Fund Investing by NRIs
    • Power of Active Funds Management
    • Online trading simplifies procedure
    • Some online trading sites
    www.icicidirect.com
    www.Indiainfoline.com
    www.Myiris.com
    ICICIDirect one up on others.

    • No Application forms to be filled up


    • Automatic debit from and credit to bank account
    • Automatic paperless SIP/SWP
    • Online order confirmations and status tracking
    • Online dividend payout / reinvestment facility
    • Online updation of portfolio of unit holdings at
    latest NAV
    Few Mutual Funds NRIs can consider

    For Conservative investors


    • HDFC Top 200 Fund
    • Sundaram Growth
    • HDFC Prudence
    • Principal MIP

    For Aggressive investors


    • HSBC Equity Fund
    • Franklin India Bluechip
    • FT India Balanced Fund
    • FT India MIP
    Product Innovations

    • Fund Of Funds is a fund that invests in other


    funds instead of securities.
    • Super SIP isn't a fund but a way of buying funds
    that combines long-term SIP with term
    insurance.
    • ETF is a hybrid financial product, a cross
    between a stock and a mutual fund .

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