MUTUAL FUND

Presented by:
Mohd. Saleem Ansari
Mohd. Sabir Kamal
Pankaj pal
Neha
Nikhil Nigam
Pulak Gupta
Ranju
Rajendra
Randheer.
WHAT IS A MUTUAL FUND?
 A Mutual Fund is a trust that pools the savings of a number of
investors who share a common financial goal.
 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
appreciation realized are shared by its unit holders in
proportion to 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
 WHY TO INVEST IN MUTUAL FUNDS?

SAVE THROUGH MUTUAL FUNDS INVEST THROUGH MUTUAL FUNDS

 Park surpluses
 Have a long term objective
 Short term investment
 Profile your risk
 Easy liquidity
 Select appropriate MF scheme,
 Tax benefits based on risk return requirement

 Mix of equity and debt

 Invest regularly/with flexibility

Frequently Used Terms

 Net Asset Value (NAV)

Net Asset Value is the market value of the assets of the
scheme minus its liabilities. The per unit NAV is the net asset
value of the scheme divided by the number of units
outstanding on the Valuation Date.
 
 Sale Price
Is the price you pay when you invest in a scheme. Also called
Offer Price. It may include a sales load.
 Repurchase Price
Is the price at which a close-ended scheme repurchases its
units and it may include a back-end load. This is also called
Bid Price.
Cont.
 Redemption Price
Is the price at which open-ended schemes repurchase their
units and close-ended schemes redeem their units on maturity.
Such prices are NAV related.  
 Sales Load
Is a charge collected by a scheme when it sells the units. Also
called, ‘Front-end’ load. Schemes that do not charge a load are
called ‘No Load’ schemes.
 Repurchase or ‘Back-end’ Load
Is a charge collected by a scheme when it buys back the units
from the unit holders.
TYPES OF MUTUAL FUNDS
Open Ended

 OPEN FOR ALL THE YEAR

 MIN SUBS AMT 50CR
 NO DURATION
 REFUNDED IF MIN SUBS NOT ACHIEVED
 REPURCHASED ANY TIME
 REDEEMED AT NAV & LOAD FACTOR RANGES (4% TO 6%)
 AS REPURCHSED SO NOT LISTED AT STOCK EX
 TRADED AS PERMITTED LOT
 DIVID MAY /MAY NOT
 SWITCHOVER ALLOWED
Close Ended
 OPEN FOR FIXED PERIOD
 MIN SUBS AMT 20CR
 DURATION (5TO7 YEARS)
 REFUNDED IF MIN AMT NOT ACHIEVED
 MAY BE REPURCHASED (AFTER 2 TO 3 YRS)
 REDEMPTION SPECIFIED & DONE AT NAV - SERVICE CHARGE
 LISTED AT STOCK EX
 DIVID MAY/MAY NOT BE
 SWITCHOVER ALLOWED
 AMT 20CR
Interval fund

 A fund that combines the features of open-ended and closed-

ended schemes, making the fund open for sale or redemption
during pre-determined intervals.
Growth fund

 A mutual fund whose aim is to achieve capital appreciation by

investing in growth stock. They focus on companies that are
experiencing significant earnings or revenue growth, rather
than companies that pay out dividends. The hope is that these
rapidly growing companies will continue to increase in value,
thereby allowing the fund to reap the benefits of large capital
gains. In general, growth funds are more volatile than other
types of funds, rising more than other funds in bull markets
and falling more in bear markets.
Income fund

 An income fund is a mutual fund structured to provide

maximum income. To achieve this goal, an income fund selects
investments that typically provide dividends or interest. These
investments include bonds, especially high-yield bonds; and
preferred stocks, which guarantee dividends. Blue-chip stocks
often provide income as well, since they are the stocks of large
companies that can afford to pay dividends. An income fund is
popular among risk-averse investors, including the retired, who
want to preserve as much of their assets as possible. An income
fund does not grow in value as much as a growth fund; this is the
trade-off for the current earnings of the income fund. An income
fund typically invests in low-growth sectors of the economy.
Balanced fund

 A mutual fund that buys a combination of common stock,

preferred stock, bonds, and short-term bonds, to provide both
income and capital appreciation while avoiding excessive
risk. The purpose of balanced funds (also sometimes called
hybrid funds) is to provide investors with a single mutual fund
that combines both growth and income objectives, by
investing in both stocks (for growth) and bonds (for income).
Such diversified holdings ensure that these funds will manage
downturns in the stock market without too much of a loss; the
flip side, of course, is that balanced funds will usually
increase less than an all-stock fund during a bull market.
Money market fund

 An open-end mutual fund which invests only in

money markets. These funds invest in short term (one
day to one year) debt obligations such as Treasury bills,
certificates of deposit, and commercial paper. The main
goal is the preservation of principal, accompanied by
modest dividends. The fund's Net Asset Value remains a
constant $1 per share to simplify accounting, but the
interest rate does fluctuate. Money market funds are very
liquid investments, and therefore are often used by
financial institutions to store money that is not currently
invested.
Special Schemes
 Industry Specific Schemes
 Industry Specific Schemes invest only in the industries
specified in the offer document. The investment of these funds
is limited to specific industries like Infotech, FMCG,
Pharmaceuticals etc.
 Index Schemes
 Index Funds attempt to replicate the performance of a
particular index such as the BSE Sensex or the NSE 50
 Sectoral Schemes
 Sectoral Funds are those which invest exclusively in a
specified sector. This could be an industry or a group of
industries or various segments such as 'A' Group shares or
initial public offerings.
Benefits of Investing in Mutual funds

 Professional Management

Mutual Funds provide the services of experienced and skilled

professionals, backed by a dedicated investment research
team that analyses the performance and prospects of
companies and selects suitable investments to achieve the
objectives of the scheme.
Cont.
 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
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.
Cont.
 Convenient Administration

Investing in a Mutual Fund reduces paperwork and helps you

avoid many problems such as bad deliveries, delayed
payments and follow up with brokers and companies. Mutual
Funds save your time and make investing easy and
convenient.
Cont.
 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.
Cont.
 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.
Cont.
 Liquidity

In open-end schemes, the investor gets the money back

promptly at net asset value related prices from the Mutual
Fund. In closed-end schemes, the units can be sold on a stock
exchange at the prevailing market price or the investor can
avail of the facility of direct repurchase at NAV related prices
by the Mutual Fund.
Cont.
 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.
Cont.
 Flexibility

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.
Cont.
 Affordability

Investors individually may lack sufficient funds to invest in

high-grade stocks. A mutual fund because of its large corpus
allows even a small investor to take the benefit of its
investment strategy.
Cont.
 Choice of Schemes

Mutual Funds offer a family of schemes to suit your varying

needs over a lifetime.
Cont.
 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.
components
 Sponsors

 Akin to the Promoter of the company,

 Contribution of minimum 40% of net worth
of AMC,
 Posses sound financial record over five years
period,
 Establishes the Fund,
 Gets it registered with the SEBI,
 Forms a trust, & appoints Board of trustee.
 Trustees

 Holds assets on behalf of unit holders in trust,

 Trustees are caretaker of unit holders money,
 Two third of the trustees shall be independent
persons (not associated with the sponsor),
 Trustees ensure that the system, processes &
personnel are in place,
 Resolves unit holders GRIEVANCES,
 Appoint AMC & Custodian, & ensure that all
activities are accordance with the SEBI regulation.
 Custodian

 Holds the fund’s securities in safekeeping,

 Settles securities transaction for the fund,
 Collects interest & dividends paid on
securities,
 Records information on corporate actions.
Asset management company

 Floats schemes & manages according to SEBI,

 Can not undertake any other business activity,
other than portfolio mgmt services,
 75% of unit holders can jointly terminate
appointment of AMC,
 At least 50% of independent directors,
 Chairman of AMC can not be a trustee of any
MF.
 Distributor/ agent

 Sell units on the behalf of the fund,

 It can be bank, NBFCs, individuals.
 Banker

 Facilitates financial transactions,

 Provides remittance facilities
Registrar& transfer agent

 Maintains records of unit holders’ accounts &

transactions
 Disburses & receives funds from unit holder
transactions,
 Prepares & distributes a/c settlements,
 Tax information, handles unit holder
communication,
 Provides unit holder transaction services.
 Regulations
• Governed by SEBI (Mutual Fund) Regulation 1996
– All MFs registered with it, constituted as trusts ( under Indian Trusts
Act, 1882)
• Bank operated MFs supervised by RBI too
• AMC registered as Companies registered under Companies Act, 1956
• SEBI- Very detailed guidelines for disclosures in offer document, offer
period, investment guidelines etc.
– NAV to be declared everyday for open-ended, every week for closed
ended
– Disclose on website, AMFI, newspapers
– Half-yearly results, annual reports
– Select Benchmark depending on scheme and compare