1. MUTUAL FUND

2. 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
realised are shared by its unit holders in
proportion to the number of units owned by
them.

3. Thus the mutual fund is the most suitable
investment for the common man as it
offers an opportunity to investment in a
diversified, professionally managed basket of
securities at a relatively low cost.

4. Flow chart of working of mutual fund

5. Organisation of mutual fund
• The Organization of a Mutual Fund is how the
mutual funds are controlled. A number of entities
are involved in the Organization of a Mutual Fund.
This helps in the proper management of the mutual
fund portfolio.
1. SEBI: The primary aim of the Securities Exchange
Board of India is to protect the interest of the
mutual fund investors. All mutual funds, private
sector and public sector are regulated by the
guidelines of the SEBI. The Asset Management
Company managing the funds has to be approved by
the SEBI.

6. 2. Mutual Fund Shareholders: The Mutual
Fund Shareholders, like the other share holders
have the right to vote. The voting rights include,
the right to elect directors during the directorial
elections, voting right to approve the alterations
investment advisory contract pertaining to the
fund and provide approval for changing
investment objectives or policies
3. Board of directors: The Board of directors
supervise the functional activities, which include
approval of the contract Asset Management
Company and other various service providers.

7. 4. Investment management company or Asset
Management Company: This body handles the
mutual fund portfolio as per the objectives and
policies mentioned in the prospectus.
5. Custodians: The custodians of the mutual funds
protect the portfolio securities. Mostly
qualified bank custodians are used for mutual funds.
6. Transfer Agents: The transfer agent for the
purpose of maintaining records and similar
functions. The maintenance of the shareholder's
accounts, calculation of dividends to the be
disbursed, sending information to the shareholders
about the account statements, notices, and income
tax information.

8. 7. Trustee: The mutual fund is required to have an
independent board of trustees, i.e.,two third of the
trustees should be independent persons who are not
associated with the sponsors in any matter.
8. Sponsor: The sponsor should contribute at least
40% to the net worth of the asset management
company. However, if any person hold 40% or
more of the net worth of an AMC shall be a
sponsor and will be required to fulfill the eligibility
criteria in the mutual fund regulations.
9. Unit holder: they are the party to whom the
mutual fund is sold. They are the ultimate
beneficiary of the income earned by the
mutual fund.

9. Advantage of mutual fund
1.Flexibility: The investments pertaining to the Mutual
Fund offers the public a lot of flexibility by means of
dividend reinvestment, systematic investment
plans and systematic withdrawal plans
2.Affordability: The Mutual funds are available in
units. Hence they are highly affordable and due to the
very large principal sum, even the small investors
are benefited by the investment scheme.
3.Liquidity: In case of Open Ended Mutual Fund
schemes, the investors have the option of
redeeming or withdrawing money at any point of
time at the current rate of net value asset.
4.Diversification: The risk pertaining to the Mutual
Funds is quite low as the total investment is
distributed in several industries and different
stocks.

10. 5.Professional Management: The Mutual Funds
are professionally managed. The experienced
Fund Managers pertaining to the Mutual
Funds examine all options based on research
and experience.
6.Potential of return: The Fund Managers of the
Mutual Funds gather data from leading
economists and financial analysts. So they
are in a better position to analyze the scopes
of lucrative return from the investments.
7.Low Costs: The fees pertaining to the custodial,
brokerage, and others is very low.
8.Regulated for investor protection: The Mutual
Funds sector is regulated by the Securities Exchange
Board of India (SEBI) to safeguard the rights of the
investor.

11. The drawback of mutual fund
1. Fees and commissions: The Mutual funds charge
administrative fees to meet the daily expenses.
Many funds charge brokerage or 'loads' to pay financial
planners or financial consultants, brokers. In case a
shareholder does not use the services of financial
adviser, he still has to pay a sales commission.
2.No Guarantees: All investments bear risk factors. The
Mutual Funds are no different. It depends on the stock
market. A fall in the stock market would trigger a fall in
the value of the mutual fund shares. Although the risk
factor pertaining to Mutual funds are much lower
compared to Mutual Funds.

12. 3.Taxes: The proceeds from the sale of mutual funds are
taxable, even if the same is reinvested in mutual funds.
4.No Insurance: The Mutual funds are regulated by the
central government. However mutual funds are still not
insured against losses.
5.Trading Limitations: The Mutual Funds usually have
high liquidity, but most of the mutual funds, such as
open-ended funds, are bought or sold at the end of the
day
6.Loss of Control: In case, if the mutual funds are
managed by the investor himself, the portfolio
management may go bad and have an adverse effect on
the earnings from the investment.

13. 7.Inefficiency of Cash Reserves: The Mutual
Funds maintain big cash reserves, for situations
such as a number of large withdrawals. The
investors are provided with liquidity, and a major
portion of the financial resources is maintained as
cash, and it is not invested in some assets.
8.Management risk: The investment pertaining to
the Mutual Funds depends on the fund manager and
his selection of the mutual fund portfolio, which is
based on speculation. If things do not go as
expected, the investments may not earn enough
money.

14. Characteristic of mutual fund
• 1. Open-end Funds
▫ a. Investors buy and sell shares back to the fund
itself
▫ b. There is no limit on the number of shares the
fund can issue
▫ c. NET ASSET VALUE (NAV)
 Defined as the total market value of all securities
held by the fund less liabilities, divided by the
number of fund shares outstanding.

15. Net asset value example
• Example: NAV
▫ XYZ Mutual Fund owns assets totaling $10M and
liabilities equal to $500,000 with 500,000 shares
outstanding
▫ Therefore, NAV is:
$10,000,000 - $500,000 / 500,000
$19/share

16. • 2. Closed-end Funds
▫ a. A fixed number of shares outstanding
▫ b. 100 Closed-end funds
▫ c. $8 billion market value
• 3. Investment Trusts
▫ a. Interest is an unmanaged pool of
investments
▫ b. Usually consist of corporate, government, or
municipal bonds

17. • 4. Load or No Load
▫ a. Load Fund
 Charges a commission when shares are bought (7 - 8
1/2% or more)
▫ b. No Load Fund
 No sales charges are levied
• 5. Other fees and Costs
▫ a. Professional Management Fee
 .25 to 1.75 percent of the average dollar amount of
assets under management

18. Types of fund (equity)
• 1. Growth
▫ Goal is capital appreciation
• 2. Maximum Growth
▫ Highly speculative, seeking large profits from
capital gains
 a. Often buy stocks of small, unseasoned companies
 b. Highly speculative

19. • 3. Income
▫ CURRENT income is main objective
 a. Interest income
 b. Dividend income
• 4. Balanced Funds
▫ Objective is to earn both capital gains and current
income
 a. High-grade common stocks (60 - 75%)
 b. Fixed income securities (25 - 40%)

20. • 5. Small Company
▫ Invest in small companies that usually have sales
of $100 million or less.
6. International
▫ Can invest in one region or area of the world
▫ Can invest in specific country
• Bond Funds
▫ Objective is to invest in bonds
 a. Income is primary objective
 b. Two advantages
 Liquidity
 Diversification

21. • 6. Money Market Funds
▫ Offers the individual investor access to high-
yielding money market instruments without
having to pay $100,000 denominations
 a. Bank CD’s
 b. Treasury Bills
 c. Commercial Paper
• 7. Dual Funds
▫ Closed-end Funds with two types of shares
 a. INCOME shares (Senior) which receive two times
income as Junior
 b. CAPITAL shares (Junior) which receive two times
the capital gains as Senior

22. • 8. Specialty Funds - Single Industry
▫ a. Option trading
▫ b. Commodity funds
▫ c. Oil drilling
▫ d. Cattle funds
▫ e. Electronics
▫ f. Gold
▫ g. Chemicals
▫ h. Health

23. Special services
• 1. Saving Plans
▫ Investor adds funds on a regular basis
• 2. Automatic Reinvestment Plans
▫ Dividends and capital gains are reinvested in
additional shares
• 3. Regular Income
▫ Through withdrawal plans, the investor can
receive periodic repayment or income
 Shares or Dollars

24. • 4. Conversion Privileges
▫ Allows the investor the right to switch from one
fund to another
 a. Must confine switches within the same family
of funds
 b. Usually no transfer charges
• 5. Check Writing Privileges
▫ a. Shareholders have the right to write checks
drawn on the Mutual Fund account
▫ b. Normally checks must be written for at least
$500
▫ c. Almost all Money Funds have this privilege

25. • The mutual fund universe can be divided into six
basic styles:
▫ Small cap growth funds
▫ Large cap growth funds
▫ Small cap value
▫ Large cap value
▫ Foreign funds
▫ Fixed income funds

26. Various mutual fund in India
1. State bank of India mutual fund
2. ICICI prudential mutual fund
3. TATA mutual fund
4. HDFC mutual fund
5. Birla Sun Life mutual fund
6. Reliance mutual fund
7. Kotak Mahindra mutual fund

27. Thank you