2. Equity Oriented Fund
Debt Fund
Hybrid Fund
a. Balanced Fund (65%Equity & 35 % Debt)
b. Monthly Income Plans (15-20% Equity)
c. Arbitrage Fund
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4. While investing in equity funds, a principle to
internalize is that markets are more predictable in the
long term, than in the short term.
So, it is better to consider equity funds, when the
investment horizon is adequately long.
Ideally, the investor should look at a minimum of 3
years.
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5. Large / Mid and Small Cap funds.
Growth or Value Funds.
Diversified Sector or Thematic
Arbitrage Fund
International Equity
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6. Regular Debt Fund vs Monthly Income Plan
MIP has an element of equity in its portfolio. Investors,
who do not wish to take any equity exposure, should opt
for a regular debt fund.
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7. FMP is ideal when the investor’s investment horizon is
in synch with the maturity of the scheme, and the
investor is looking for a more predictable return than
conventional schemes, and a return that is generally
superior to what is available in a fixed deposit.
An investor, who is likely to require the funds anytime,
would be better off investing in a normal open-ended
debt fund.
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8. Diversified debt funds invest in a mix of government
securities (which are safer with respect to the risk of
default) and non-government securities (which offer
higher yields, but are subject to credit risk). A diversified
mutual fund scheme that manages its credit risk well can
generate superior returns, as compared to a Gilt Fund.
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9. Longer term debt securities fluctuate more than shorter
term debt securities. Therefore, NAVs of long-term debt
funds tend to be more volatile than those of short-term debt
funds.
It was also seen that as yields in the market goes down,
debt securities gain in value. Therefore, long term debt
funds would be sensible in declining interest rate scenarios.
However, if it is expected that interest rates in the market
would go up, it would be safer to go with Short Term Debt
Funds. As the rates rise, the short-term bonds would
mature, allowing the fund manager to deploy the proceeds
at higher rates.
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10. An investor seeking the lowest risk ought to go for a
liquid scheme.
However, the returns in such instruments are lower.
The comparable for a liquid scheme in the case of retail
investors is a savings bank account.
Switching some of the savings bank deposits into liquid
schemes can improve the returns for him.
Businesses, which in any case do not earn a return on
their current account, can transfer some of the surpluses
to liquid schemes.
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11. Hybrid fund can have an equity or debt orientation.
Balanced Fund (65%Equity & 35 % Debt)
Monthly Income Plans (15-20% Equity)
Arbitrage Fund
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12. Offer Document
Monthly Fact sheets of fund houses.
Information found on investment oriented websites.
Website of AMFI and SEBI and respective mutual fund
Information providers of mutual fund
www.valueresearchonline.com
www.mutualfundsindia.com
www.crisilfundservices.com
www.morningstar.co.in
www.lipperweb.com
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13. Website on AMFI and SEBI and respective MF.
Rankings and ratings of funds after classification of
funds into a peer group.
Agencies that use MF data to create comparisons and
reports for product comparison and selection.
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14. Different AMCs have different approaches, styles and value
systems in doing business.
An investor has to be comfortable with the AMC, before
investing in any of its schemes.
An investor buying into a scheme is essentially buying into its
portfolio.
Most AMCs share the portfolio of all their schemes in their
website on a monthly basis.
Equity investors would like to convince themselves that the
sectors and companies where the scheme has taken higher
exposure, are sectors / companies that are indeed promising.
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15. Debt investors would ensure that the weighted average
maturity of the portfolio is in line with their view on
interest rates.
Higher weighted average maturity during periods of
declining interest rates.
Lower weighted average maturity, and higher exposure to
floating rate instruments during periods of rising interest
rates.
Investors in non-gilt debt schemes will keep an eye on
credit quality of the portfolio.
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16. Some other parameters that are considered while
selecting schemes within a category, are as follows:
Fund Performance
Expense Ratio
Portfolio Turnover ratio
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17. MF products differ primarily in terms of return, risk
and desirable investing horizon.
Performance should be consistent.
Long term performance over 3,5,7 or 10 should be use
to select equity funds.
For selecting Debt fund performance analyzed of last 1
years.
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18. Performance of debt fund is typically evaluated for
period from 3 months to 1 year.
Funds with low credit may be give a high return.
Performance of Debt Fund is based on interest rate.
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19. Higher expense ratio will directly reduce the return of
the fund and vice versa.
Institution Plan with lower expense ratio for large
investing's. (Minimum investment is large)
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20. Portfolio turnover ratio is total sales or purchase of
fund divided by the average net assets of the fund.
Higher the ratio, greater the frequency of trading and
lower the average holding period.
Higher turnover means the stock held in a portfolio are
changed very frequently.
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21. Frequent trading increases transaction cost of the
scheme
Lower turnover indicates that the fund manager has
high conviction in the stock.
PTR= Total sales or Purchase of Funds/Average net
assets
Higher portfolio turnover having higher expense ratio.
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22. Q.1 An investor, in the debt scheme, who completely
wants to eliminate investment in equity should invest in
Monthly Income Plan?
a.True
b.False
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23. Q.2 The comparable for a liquid scheme is …..
a. Equity Scheme.
b. Balance Scheme.
c. Savings Bank Account
d. GILT Fund
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24. Q.3 Arbitrage funds are meant to give better equity risk
exposure.
a. True
b. False
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25. Q. 4 Equity markets are more predictable in the long term
than the short.
a. True
b. False
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26. Q.5 Ratio calculated based on churning of the portfolio by
the mutual fund scheme is called…..
a. Portfolio liquidity ratio
b. Portfolio Churning ratio
c. Portfolio Turnover ratio
d. Any of the above
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27. Q.6 Long term gilt funds will do well when interest rates
are expected to decline.
a. True
b. False
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28. Q.7 The core portfolio will be invested according to the
long term needs and goals of the investors.
A. True
B. False
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29. Q.8 The satellite portfolio will be invested to take
advantage of expected short term market movements.
A.True
B.False
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30. Q.9 The exposure to …… can be increased when inflation
is high or there is political, economic and fiscal
uncertainties.
A. Balance fund.
B. Gold Fund
C. Sector Fund
D. Monthly Income Plan.
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31. Q.10 ………… are suitable for investors looking for
exposure to an asset class without risk associated with
fund manager selection and strategies.
A. Active Fund
B. Passive Fund
C. Both of the above
D. None of the above
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