Fundamentals and more

A mutual fund is an investment that allows

all investors access a well-diversified portfolio of equities, bonds or other securities.

Each investor has a share 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

Mutual Fund is a Trust Which has Sponsor Custodians

AMC
Trustees

Trust is established by a Sponsor Sponsor is like the promoter of the company AMC approved by SEBI manages the funds across various securities Custodian holds the securities in their custody

Trustees are responsible for monitoring the funds and compliance SEBI regulations require that at least two thirds of the directors of trustee company should not be associated with the sponsors 50 per cent of the directors of AMC must be independent

Small Investments

Liquidity

Professional

Transparent

Choice

Spreading Risk

Equities
Diversified Sector / Theme Dividend Yield Index Funds

Debt
Income Fund Short Term Income Fund Liquid

Hybrid Funds
Equity Oriented
60% Equities & 40% Debt

Debt Oriented
50% Debt 50% Equities

Monthly Income Plans

Performance

Compare between same funds

Risk

Does the risk justify the return Combine risk and performance

Portfolio (Equities)

Internals of a fund Focus on quality of stocks

Portfolio (Debt)

High Return: Long Duration Stable low return short duration Personality oriented activity Buying a fund managements track record Higher Margins = Higher Returns Entry Load / Exit Load

Management

Cost

An equity fund that replicates a particular equity index by investing in the stocks that the fund tracks An index fund can mirror either S&P Sensex or CNX Nifty or BSE-100 and so on A passive investment strategy
John Bogle : Father of Index Funds

No out performance

Limited Options

Suited for Efficient Markets

Parameter Structure Expense Returns Volatility

Active Funds Based on research and fund managers objective Is usually 1 2% Outperforms the Index Is volatile

Passive Funds Mirrors the Index Is usually 0.5 - 1 % Mirrors the index Stable and steady

Suitable to whom

Risk taking investors

Risk averse investors

EQUITY

DEBT

Systematic Withdrawal Plan Dividends

Regular Source of Income ?? No tax on dividend ??? Can I withdraw before 1 year ?? Regular dividend ???? Principal Loss ???? No Exit Load ??? Liquidity ???

Sebi dictates the dividend terms:

Dividend from earned income only The NAV has to be less than the Dividend growth

Dividends declared under MIPs are tax-free Income from bank FDs is taxable as "income from other sources STCG : for less than one year LTCG : 10 % without indexation or 20 % with indexation whichever is lower

Best of Both Worlds Interest rates are upwards

Caps Equity exposure = Controlled Risk

Stable Return Apt for Retired and Risk Averse People Tax Efficient

Close ended funds which invest in

CPs

Govt Bonds

T Bills

Certificate of Deposits

Commercial Papers

The FMP offer document should mention

The instruments The allocation of funds across instruments Credit Quality of the Funds The Yield of the Funds

Buy and Sell of Mutual Funds on real-time basis

Index Funds when traded on exchanges are Exchange Traded Funds Investors can have real time access to stocks across international markets ETF trading is also cost efficient