3. OVERVIEW OF 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 is 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.
4. What Is Mutual Fund?
• A Mutual Fund is a trust that pools together the
savings of a number of investors who share a
common financial goal.
The money thus collected is then invested in
market instruments such as shares,
debentures and other securities.
5. History of the Indian Mutual
Fund Industry
The mutual fund industry in India started in 1963
with the formation of Unit Trust of India, at the
initiative of the Government of India and
Reserve Bank.
The history of mutual funds in India can be
broadly divided into four distinct phases:
6. First Phase – 1964-87
Unit Trust of India (UTI) was established on
1963 by an Act of Parliament. It was set up by
the Reserve Bank of India and functioned under
the Regulatory and administrative control of the
Reserve Bank of India.
The first scheme launched by UTI was Unit
Scheme 1964. At the end of 1988 UTI had
Rs.6,700 crores of assets under management.
7. Second Phase – 1987-1993 (Entry of
Public Sector Funds)
1987 marked the entry of non- UTI, public sector
mutual funds set up by public sector banks and Life
Insurance Corporation of India (LIC) and General
Insurance Corporation of India (GIC).
SBI Mutual Fund was the first non- UTI Mutual
Fund established in June 1987.
8. Third Phase – 1993-2003 (Entry of
Private Sector Funds)
With the entry of private sector funds in 1993, a new
era started in the Indian mutual fund industry, giving
the Indian investors a wider choice of fund families.
In 1993 was the year in which the first Mutual Fund
Regulations came into being, under which all mutual
funds, except UTI were to be registered and
governed.
9. Fourth Phase – since
February 2003
In February 2003,
Formation of UTI Mutual Fund Ltd, sponsored by SBI, PNB,
BOB and LIC. It is registered with SEBI and functions under
the Mutual Fund Regulations.
10. The flow chart below describes the
working of a mutual fund:
11. ADVANTAGES OF MUTUAL FUNDS
Professional Management
Minimization of risk
Return
Transparency
Choice of schemes
Tax benefits
12. NAV ( NET ASSET VALUE)
Net asset value of fund is simply the net value of assets
divided by number of units outstanding.
Buying and selling into funds is done on the basis of
NAV- related prices.
http://www.mutualfundsnavindia.com/
13. Entry Load / Exit Load
A load is a charge , which the mutual fund may collect on
entry and /or exit from a fund. some funds do not charge
any entry or exit load.
The mutual fund would buy back the units at rate lower
than the NAV. There are no fixed exit loads which are
charged. It varies based on the scheme. The current
practice is the funds could charge any way from 0.5% to 3%
depending on the holding period. If the investors continue
to hold the investment beyond the specified period, no exit
load is charged.
For eg: An equity fund currently at an NAV of Rs. 72/- per
unit charges, exit load of 1% if the investor exits within 1
year of investment. If an investor wants to sell his mutual
fund units, which were bought 7 months back the
redemption NAV for such investor would be Rs.71.20/-
14. Transaction Charges: These charges are one time charges
applicable when the money is invested. This is applicable for the
investments of over Rs. 10,000/-. This would be paid to the
distributor/intermediary who is selling the fund.
Systematic Investment Plan (SIP) is an investment vehicle offered
by mutual funds to investors, allowing them to invest using small
periodically amounts instead of lump sums. The frequency of
investment is usually weekly, monthly or quarterly.
15. TYPES OF MUTUAL FUNDs
Mutual
Funds
By Maturity
Period
By Investment
Objective
Equity
Income/
Debt
Balance
fund
Money
market/Liquid
Funds
Gilt fund
Close
ended
Open
ended
16. On the basis of Structure
Open ended Schemes
Closed ended Schemes.
17. OPEN ENDED SCHEMES
Open ended Schemes are schemes which offers unit for sale
without specifying any duration for redemption.
The main feature of such kind of scheme is liquidity.
CLOSED ENDED SCHEMES
These are the schemes in which redemption period is specified.
18. On the basis of growth
objective
Growth funds
Income funds
Balanced Funds
Money Market funds
19. GROWTH FUND
The aim of growth funds is to provide capital appreciation
over the medium to long- term. Such schemes normally
invest a major part of their corpus in equities. Such
funds have comparatively high risks
20. INCOME FUNDS
Funds that invest in medium to long-term debt
instruments issued by private companies, banks,
financial institutions, governments and other entities
belonging to various sectors (like infrastructure
companies etc.) are known as Debt / Income Funds
21. BALANCED FUND
These funds provide both growth and regular income as
these schemes invest in debt and equity.
The NAV of these schemes is less volatile as
compared pure equity funds.
22. MONEY MARKET FUNDS
Money market / liquid funds invest in short-term
(maturing within one year) interest bearing debt
instruments. These securities are highly liquid and
provide safety of investment, thus making money market
/ liquid funds the safest investment option when
compared with other mutual fund types.
23. On the basis of Special Schemes
Industry Specific Schemes
Index Schemes
Sectoral Schemes.
24. 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
25. Index Funds
An index fund is a mutual fund that imitates the portfolio of an index.
These funds are also known as index-tied or index-tracked mutual
funds.
Reliance Index Fund - Sensex Plan.
LIC MF Index Fund Sensex.
ICICI Prudential Nifty Index Fund.
UTI Nifty Index Fund.
Franklin India Index Fund Nifty Plan.
SBI Nifty Index Fund.
IDBI Nifty Index Fund.
Reliance Index Fund - Nifty Plan
26. Sectoral Schemes
A sector fund is a fund that invests solely in businesses that
operate in a particular industry or sector of the
economy. Sector funds are commonly structured as
mutual funds or exchange-traded funds (ETFs)
IDFC Infrastructure Fund.
Aditya Birla Sun Life Banking And Financial Services Fund.
Franklin Build India Fund.
Sundaram Rural and Consumption Fund.
DSP BlackRock Natural Resources and New Energy Fund.
Reliance Power and Infra Fund.
Mirae Asset Great Consumer Fund.
Kotak Infrastructure & Economic Reform Fund.
27. Investment strategies
Systematic Investment Plan (SIP)
Invest a fixed sum every month.
Fewer units when the share prices are high, and more
units when the share prices are low.
Convenience and Discipline are the benefits of SIP.
LumSum
28. Various Mutual Funds in India
State Bank of India mutual fund
ICICI prudential mutual fund
TATA mutual fund
HDFC mutual fund
Birla sun life mutual fund
Reliance mutual fund
Kotak Mahindra mutual fund etc..
29. ASSOCIATION OF MUTUAL FUNDS IN INDIA
Association of Mutual Funds in India (AMFI) was incorporated on 22nd
August, 1995.
(AMFI) modeled on the lines of a Self Regulating Organization (SRO) with a
view to 'promoting and protecting the interest of mutual funds and their
unit-holders, increasing public awareness of mutual funds, and serving the
investor’s interest by defining and maintaining high ethical and professional
standards in the mutual funds industry'
Association of Mutual Funds India has brought down the Indian mutual
fund industry to a professional and healthy market with ethical lines
enhancing and maintaining standards.
It follows the principle of both protecting and promoting the interests of
mutual funds as well as their unit holders.
30. What is an 'Assets Under Management – AUM’
Assets under management (AUM) is the total market value of assets
that an investment company or financial institution manages on behalf
of investors. Assets under management definitions and formulas vary
by company.
Some financial institutions include bank deposits, mutual funds and
cash in their calculations; others limit it to funds under discretionary
management, where the investor assigns responsibility to the
company.
31. Examples
ICICI Prudential Mutual Fund. It is one of the top AMCs
in India. ...
HDFC Mutual Fund. ...
Reliance Mutual Fund. ...
Aditya Birla Sun Life Mutual Fund. ...
SBI Mutual Fund. ...
UTI Mutual Fund. ...
Kotak Mahindra Mutual Fund. ...
Franklin Templeton Mutual Fund.
