INVESTOR

AWARENESS
PROGRAM
 Taking Control of
Your Financial Future
 Know
Step One

Yourself
 Reductions
Cash Flow

are possible

Essential Discretionary
Income Savings
Expenses Expenses
 Supporting Purchase
Parents of House
Cash Flow

Why Do
Marriage Retirement
We Save?

Upgrading
Vacations
Lifestyle
 Impact of 5% Yearly Inflation on Expenses
79,599
Inflation

62,368

48,867

38,288
30,000

Today Five Years Ten Years Fifteen Years Twenty Years

The above graph is used to explain the concept and is for illustration purpose only and should not used for development or implementation of
an investment strategy. Past performance may or may not be sustained in future.
 Impact of 5% Yearly Inflation on Purchasing Power

1,00,000
Inflation

78,353

61,391
48,102
37,689

Today Five Years Ten Years Fifteen Years Twenty Years

The above graph is used to explain the concept and is for illustration purpose only and should not used for development or implementation of
an investment strategy. Past performance may or may not be sustained in future.
Investing and Inflation

Investing ‒ The Safeguard Against Inflation

You work hard

Put money to
Start Saving … Progress to earn money … Benefit from
work rather than
earlier you from Saving So, make the the Power of
accumulating or
start the better to Investing money work Compounding
keeping it idle
hard for you
Investment Options

BANK MUTUAL
INSURANCE PROPERTY
DEPOSITS FUNDS

STOCKS BONDS GOLD

Aligned to Different Goals

Factors to Evaluate Investments

Liquidity Convenience Taxability of

Earnings

Safety Returns Ticket size Tax

Deduction
Aligned to Different Goals

Investments that Grow in Value Investments that Generate Income

Property (land/plot/self occupied/vacant) Bonds

Gold (except for Sovereign Gold Bond) NSC/KVP

Art Collection Rent yielding Property

Equity Shares Bank / Company Deposits

Mutual Funds Mutual Funds

“
Never Depend on
Single Income.
Make Investment
To Create A
Second Source.
“
Warren Buffett
Power of Compounding

2
1

Invest ₹ 1 today Invest ₹ 1 today

and get ₹ 1 Crore and the amount doubles
after 30 days daily till the 30th day

The mentioned above are used to explain the concept and is for illustration purpose only and should not be used for development or
implementation of any investment strategy. It should not be construed as investment advice to any party. Past performance may or may
not be sustained in future
Power of Compounding
Option 1 Option 2
Day 1 ₹ 1.00 ₹ 1.00
Day 2 ₹ 2.00
Day 3 ₹ 4.00
Day 4 ₹ 8.00
Day 5 ₹ 16.00
Day 6 ₹ 32.00
Day 7 ₹ 64.00
Day 8 ₹ 28.00
Day 9 ₹ 256.00
Day 10 ₹ 512.00
Day 11 ₹ 1,024.00
Day 12 ₹ 2,048.00
Day 13 ₹ 4,096.00
Day 14 ₹ 8,192.00
Day 15 ₹ 16,384.00

Day 30 1 Crore Looks like option 1 is better

The above table is used to explain the concept and is for illustration purpose only and should not used for development
or implementation of an investment strategy. Past performance may or may not be sustained in future.
Power of Compounding
Option 1 Option 2
Day 16 ₹ 32,768.00
Day 17 ₹ 65,536.00
Day 18 ₹ 1,31,072.00
Day 19 ₹ 2,62,144.00
Day 20 ₹ 5,24,288.00
Day 21 ₹ 10,48,576.00
Day 22 ₹ 20,97,152.00
Day 23 ₹ 41,94,304.00
Day 24 ₹ 83,88,608.00
Day 25 ₹ 1,67,77,216.00
Day 26 ₹ 3,35,54,432.00
Day 27 ₹ 6,71,08,864.00
Day 28 ₹ 13,42,17,728.00
Day 29 ₹ 26,84,35,456.00
Day 30 ₹ 1,00,00,000.00 ₹ 53,68,70,912.00
The above table is used to explain the concept and is for illustration purpose only and should not used for development
or implementation of an investment strategy. Past performance may or may not be sustained in future.
 Person “A” starts at the age of 25 years and contributes ₹ 10,000 per month for his retirement goal. “A” saves for
next 35 years till he reaches 60 years of age.
Starting Early

Person “B” starts a bit late at the age of 35 years and contributes ₹ 15,000 per month for his retirement goal. “B”
saves for next 25 years till he reaches 60 years of age.

Both earned same 10% CAGR

A B

25 years Starts at 35 years

₹ 10,000 per month Contribution per month ₹ 15,000 per month

10% CAGR 10%

₹ 42 Lakhs Total contributions ₹ 45 Lakhs

~ 3.82 Crore ~ 2.01 Crore
Accumulated Corpus
9.11X 4.46X

The above table is used to explain the concept and is for illustration purpose only and should not used for development
or implementation of an investment strategy. Past performance may or may not be sustained in future.
Fixed Deposits ‒ An Insufficient Tax Structure
Redemption
Instrument 01-Jan-13 Investment Units 31-Dec-20
Value
XYZ Short Term Debt Fund ‒ Growth Option 12.4477 ₹ 1,00,000.00 8033.6126 24.5433 ₹ 1,97,171.36

Fixed Deposit for 8 years at 8.5%

₹ 1,00,000.00 ₹ 1,95,986.00
Interest compounded on Quarterly basis

Instrument Indexed Cost Tax Post Tax Value

XYZ Short Term Debt Fund ‒ Growth Option ₹ 1,50,500.00 9707.64374 ₹ 1,87,463.72

SBI Fixed Deposit for 8 years at 8.5%

Interest compounded on Quarterly basis ₹ 29,947.63 ₹ 1,66,038.37

Cost Inflation Index (Source: incometaxindia.gov.in)

FY 2012-13 200

FY 2020-21 301

Interest Income taxable at 30% and 4% cess, no surcharge

Long Term Capital Gains (for holding period greater than 3 years) on non-equity oriented mutual funds at 20% post indexation and 4% cess, no surcharge
FD rate of 5-10 year of one of the largest PSU Banks
Past performance may or may not be sustained in future
 ₹

Mutual Funds
How Does It Works?

Investor Fund House

Returns

Securities like Stock, Bonds, Gold etc. Fund Manager

 Benefits of Investing in Mutual Funds
Benefits

Professional Economies Liquidity Tax Investment Systematic Approach

Management of Scale Benefits Comfort to Investments

01 03 05 07 09 11

02 04 06 08 10

Affordable Portfolio Transparency Tax Deferral Convenient Regulatory

Diversification Options Comfort
Types of Mutual Funds

On the Basis of Structure

NFO

Scheme AMC will auto

can be Close-Ended redeem the
subscribed funds on the
only during Mutual Fund day of
NFO period maturity.
Types of Mutual Funds

On the Basis of Structure

NFO

Scheme AMC will auto

Scheme
can be Open-Ended
Close-Ended redeem the
can be
subscribed funds on the
subscribed
only during Mutual
Mutual Funds
Fund day of
on any day
NFO period maturity.
Types of Mutual Funds

On the Basis of Structure

NFO

Scheme Funds
can be can be
subscribed redeemed
during NFO only in
period and Interval Funds Specified
Specified Transaction
Transaction Period, subject
Period to exit loads..
Mutual Fund Products

Equity Schemes

1 2 3

Multi Cap Fund Large Cap Fund Large & Mid Cap Fund
invests 25% in Large, 25% in investing 80% of total assets investing 35% in Large Cap &
Mid Cap & 25% in Small Cap companies. in Large Cap companies 35% in Mid Cap companies

4 5 6

Mid Cap Fund Small Cap Fund Dividend Yield Fund

investing 65% of total assets investing 65% of total assets predominantly investing in
in Mid Cap companies in Small Cap companies dividend yielding companies
Mutual Fund Products

Equity Schemes

7 8 9

Value Fund Contra Fund Focused Fund

Scheme should follow a Scheme should follow a A scheme with a focused
value investment strategy and minimum contrarian investment strategy and portfolio of not more than 30 stocks
65% of the total assets in equity and equity minimum 65% of the total assets in equity
related instruments and equity related instruments

10 11 12

Sectoral/Thematic Fund Flexicap Fund ELSS investing 80% of total assets

investing 80% of total assets investing across Large, in equity (in accordance with
in a particular sector/theme Mid Cap & Small Cap companies Equity Linked Saving Scheme,
2005 notified by Ministry of Finance)

Note: AMCs are permitted to offer either Value fund or Contra fund.
Mutual Fund Products

Debt Schemes

1 2 3

Overnight Fund Liquid Fund Investment in Debt and Ultra Short Duration Fund
Investment in overnight securities money market securities with investment in Debt & Money Market
having maturity of 1 day maturity of upto 91 days only instruments such that the Macaulay
duration of the portfolio is between
3 months ̶ 6 months

4 5 6

Low Duration Fund Money Market Fund Short Duration Fund

Investment in Debt & Money Market Investment in Money Market instruments Investment in Debt & Money Market
instruments such that the Macaulay having maturity up to 1 year instruments such that the Macaulay
Duration of the portfolio is between Duration of the portfolio is
6 months ̶ 12 months between 1 year – 3 years
Mutual Fund Products

Debt Schemes

7 8 9

Medium Duration Fund Medium to Long Duration Fund Long Duration Fund Investment in
Investment in Debt & Money Market Investment in Debt & Money Market Debt & Money Market Instruments
instruments such that the Macaulay instruments such that the Macaulay such that the Macaulay Duration of the
Duration of the portfolio is between duration of the portfolio is between portfolio is greater than 7 years
3 years – 4 years 4 years – 7 years

10 11 12

Dynamic Bond Fund Corporate Bond Fund Minimum Credit Risk Fund
Investment across duration investment in corporate bonds ̶ 80% Minimum investment in corporate
of total assets in AA+ and above bonds-65% of total assets in
AA and below
Mutual Fund Products

Debt Schemes

13 14 15

Banking & PSU Debt Fund GILT Fund GILT Fund with constant duration
Minimum investment in Debt instruments of Minimum investment in Minimum investment in Gsecs-80% of total
banks, Public Sector Undertakings, Public Gsecs-80% of total assets assets such that the Macaulay duration of
Financial Institutions and Municipal Bonds the portfolio is equal to 10 years
80% of total asset

16
IMPORTANT NOTE

Floater Fund Minimum investment All open ended debt schemes (except Overnight Fund, Liquid Fund, Gilt Fund and Gilt Fund
in floating rate instruments with 10 year constant duration) shall hold at least 10% of their net assets in liquid assets.
(including fixed rate instruments converted These liquid shall not be included for determining the scheme characteristics.
to floating rate exposures using Circular: 06 Nov’2020
swaps/derivatives) 65% of total assets
Mutual Fund Products

Hybrid Schemes

1 2 3

Conservative Hybrid Fund Balanced Hybrid Fund Aggressive Hybrid Fund

Equity Debt Equity Debt Equity Debt

10% - 25% 75% - 90% 40% - 60% 40% - 60% 65% - 80% 20% - 35%

Note: AMCs are permitted to offer either an aggressive hybrid or balanced hybrid firm.
Mutual Fund Products

Hybrid Schemes

4 5 6

Dynamic Asset Allocation or Multi Asset Allocation Arbitrage Fund Scheme

Balanced Advantage invests in at least three* asset following arbitrage strategy.
Investment in equity/debt classes with a minimum allocation Minimum investment in equity &
that is managed dynamically of at least 10% each in all equity related instruments ̶
three asset classes 65% of total assets

Equity Savings Minimum investment

in equity & equity related
instruments 65%of total assets
and minimum investment in debt 10%
of total assets Minimum hedged &
unhedged to be stated in the SID

Note: *Foreign securities will not be treated as a separate asset class.

Mutual Fund Products

Solution Oriented Schemes

1 2

Retirement Fund Lock-in period for at Children’s Fund Scheme having a lock-in
least 5 years or till retirement age, for at least 5 years or till the child attains
whichever is earlier age of majority, whichever is earlier
Mutual Fund Products

Other Schemes

1 2

Index Funds / ETFs minimum 95% of the Fund of Funds (Overseas/Domestic)

assets to be invested in securities of the minimum 95% of the total assets to be
index which is being replicated/tracked. invested in the underlying fund(s).

Note: AMCs are permitted to offer either Value fund or Contra fund.
 Years/Return 6% 8% 10% 12% 14%
SIP Illustration

5 350594 369834 390412 412432 436004

10 823494 920828 1032760 1161695 1310457

15 1461364 1741726 2089621 2522880 3064269

20 2321755 2964736 3828485 4995740 6581731

25 3482295 4786833 6689452 9488175 13636389

30 5047688 7501476 11396627 17649569 27785278

SIP of ₹ 5000/month.
Contribution considered at the first date of the month.
Market Values at the end of years.

The above is for illustration purpose only. The SIP amount, tenure of SIP, expected rate of return are assumed figures for the purpose of explaining the concept of
advantages of SIP investments. The actual result may vary from depicted results depending on scheme selected. It should not be construed to be indicative of scheme
performance in any manner. Past performance may or may not be sustained in future.
Common Mistakes
Retirement
• Starting late, assuming will allocate higher in later years.
• Depending solely on EPF...
• Depending solely on NPS for government employees.
• Assuming your children will help you out.
• Allocating everything in equity, as the horizon is long term and disrespecting
the risk appetite.
• Not allocating in PPF/VPF if 1.5 lakh, 80C has been achieved by other means.
• Not utilizing additional 50K tax exemption of 80CCD(1B), NPS.
• Withdrawing retirement corpus for other goals.
• Buying life insurance cum investment product after retirement.
• Gifting the retirement corpus to your children that they will take care of you.
• Withdrawing EPF in between the jobs and not transferring it.
• Not harvesting the ₹1 lakh capital gains limit, whenever possible.
Common Mistakes

Life Insurance Health Insurance Short Term Goals

• Not taking adequate life • Not giving all information • Buying volatile assets (equity)
insurance. (by mistake). in goals which are just around
the corner.
• Mixing insurance and • Hiding material information
investments. intentionally. • Taking the funds marked for short
terms goals lightly, especially
• Term plan with return of premium. • Relying solely on insurance when the funds are available.
provided by employer.
• Term plan with limited pay. • Taking exposure in illiquid assets
• Not understanding the benefits (real estate) for short term goals.
• Term with life cover and limitations of policies.
up to 99 years.
• Not having a buffer fund for
things which will not be
covered by policy.
Mutual Fund Taxation
Equity-Oriented Mutual Fund Schemes Non-Equity-Oriented Mutual Fund Schemes

Different taxation is applicable for schemes which Taxation is different for schemes which have less tan
have 65% of the assets under management in equity 65% of the assets under management in equity shares
shares listed on recognised stock exchanges in India listed on recognised stock exchanges in India

When a unitholder sells units of the scheme, the selling price could be different from the price at which the units
were bought. The difference between the purchase price of the units and the selling price of the units would be
treated as capital gain (or loss). Capital gains tax is classified depending on the period of holding and the type of
funds invested in.

Capital gains are classified into two categories: short term capital gains and long term capital gains. Long-term is
defined as holding period of more than 3 years in case of non-equity oriented funds, whereas the same more than
1 year in case of equity-oriented funds. Capital gains booked before completion of this period would be treated as
short term capital gains.

For individual nature of tax implications, investors are requested to consult their tax advisors before investing
Mutual Fund Taxation
Equity-Oriented Funds Non-Equity-Oriented Funds
Marginal tax rate,
Short Term Capital Gains 15%
as applicable for the investor
Long Term Capital Gains 10%* 20% with indexation benefits
*Income tax at the rate of 10% (without indexation benefit) on long-term capital gains greater than 1 Lakh provided transfer of such units is subject to STT.

Note: In addition to the above, surcharge and cess is applicable.

The surcharge is calculated on the base tax and the cess is calculated on the aggregate of base tax and surcharge.

Equity mutual funds were exempt from long term capital gains tax till 31st March’2018. In the Union Budget of the year 2018,
this was changed. Starting April 2018, long term capital gains became taxable at the rate of 10 percent. Relating to this,
there are two important provisions that are discussed here:

Exemption up to Rs. 1 lakh: In case of long-term capital gains arising out of equity shares and equity-oriented mutual funds,
the tax is applicable only on the capital gains above Rs. 1 lakh. The first Rs. 1 lakh worth of long-term capital gain from this category
is tax-exempt.

Grandfathering of capital gains: Since the capital gains from equity assets were non-taxable till the announcement of the
budget in 2018, a reintroduction of the tax would have meant that even the gains earned till then would also become taxable.
This is equivalent to introducing tax with retrospective effect. In order to avoid such a situation, the Finance Minister introduced
a clause, which came to be known as the “grandfathering of the capital gains”.
For individual nature of tax implications, investors are requested to consult their tax advisors before investing
 New Regime Slab
Existing Regime Slab Rates for FY 20-21 and FY 21-22
Rates for FY 21-22
Income Tax Slab Resident individual
Resident Individuals & Resident Individuals & Applicable for All
& HUF < 60
HUF > 60 to < 80 years HUF > 80 years Individuals & HUF
years & NRIs
NIL
Taxation

Upto ₹ 2.5 lakhs NIL NIL NIL

₹ 2.5 lakhs to ₹ 3 lakhs NIL NIL 5%

5% (tax rebate u/s
(tax rebate u/s
87a is available) 5% (tax rebate u/s 87a
₹ 3 lakhs to ₹ 5 lakhs NIL 87a is available)
is available)

₹ 5 lakhs to ₹ 7.5 lakhs 20% 20% 20% 10%

₹ 7.5 lakhs to ₹ 10 lakhs

20% 20% 20% 15%

₹ 10 lakhs to ₹ 12.5 lakhs 30% 30% 30% 20%

₹ 12.5 lakhs to ₹ 15 lakhs

30% 30% 30% 25%

> ₹ 15 lakhs 30% 30% 30% 30%

For individual nature of tax implications, investors are requested to consult their tax advisors before investing
Mutual Fund Investments are subject to market risks, read all scheme related documents carefully
An Investor education initiative by Motilal Oswal Mutual Fund

Happy Investing
Disclaimer:

This publication is pursuant to Investor Awareness Initiative by Motilal Oswal Mutual Fund. This shall not be
construed as offer to invest in any financial product or Scheme. The objective of this publication is restricted to
informational purposes only. All investors have to go through a one-time KYC (Know Your Customer) process.
For further details on KYC, Change of address, phone number, bank details etc. list of SEBI registered Mutual
Funds and redressal of complaints including details about SEBI SCORES portal, visit link
https://www.motilaloswalmf.com/Download/KYC-and-Redressal-of-Complaints . Investors should invest only
with SEBI registered Mutual Funds details of which can be verified on the SEBI website under “SEBI
Intermediaries/ Market Infrastructure Institutions. Mutual Fund Investments are subject to market risks, read all
scheme related documents carefully”.