you can know about the MF and its funcation

1. MUTUAL FUND INVESTEMENT IN
INDIA

2. Meaning of Mutual fund
A mutual fund is an investment vehicle
made up of a pool of moneys collected from many
investors for the purpose of investing in securities such
as stocks, bonds, money market instruments and other
assets.

3. History of Mutual fund
 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 of India. The
history of mutual funds in India can be broadly divided
into four distinct phases.

4. First Phase - 1964-1987
 Unit Trust of India (UTI) was established in 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. In 1978 UTI was de-linked from the
RBI and the Industrial Development Bank of India (IDBI) took
over the regulatory and administrative control in place of RBI.
The first scheme launched by UTI was Unit Scheme 1964. At
the end of 1988 UTI had Rs. 6,700 cores of assets under
management

5. 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 followed by Canbank Mutual Fund (Dec 87), Punjab
National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund
(Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund
(Oct 92). LIC established its mutual fund in June 1989 while GIC
had set up its mutual fund in December 1990.

6. 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. Also, 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.
 The first private sector mutual fund registered in July 1993

7. Fourth Phase - since February 2003
 In February 2003, following the repeal of the Unit Trust of India Act
1963 UTI was bifurcated into two separate entities. One is the
Specified Undertaking of the Unit Trust of India with assets under
management of Rs. 29,835 cores as at the end of January 2003,
representing broadly, the assets of US 64 scheme, assured return and
certain other schemes. The Specified Undertaking of Unit Trust of
India, functioning under an administrator and under the rules framed
by Government of India and does not come under the purview of the
Mutual Fund Regulations.

8. Types of mutual fund
 Money market funds
Open-ended funds
Closed –ended funds
 Fixed income funds
 Equity funds
 Balanced funds
Index funds
 Specialty funds
 Fund-of-funds

9. 1. Money market funds
 These funds invest in short-term fixed income securities
such as government bonds, treasury bills, bankers’
acceptances, commercial paper and certificates of deposit.
They are generally a safer investment, but with a lower
potential return then other types of mutual funds.

10. Open ended fund
 open for all the year
 minimum subscription amt 50cr
 No duration
 refunded if min subs not achieved
 repurchased any time
 redeemed at nav & load factor ranges (4% to 6%)
 as re purchased so not listed at stock ex
 traded as permitted lot
 dividend may /may not
 switchover allowed

11. Closed ended fund
 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
 dividend may/may not be
 switchover allowed

12. Fixed income funds
 These funds buy investments that pay a fixed rate of return
like government bonds, investment-grade corporate bonds
and high-yield corporate bonds. They aim to have money
coming into the fund on a regular basis, mostly through
interest that the fund earns. High-yield corporate bond
funds are generally riskier than funds that hold
government and investment-grade bonds.

13. Equity funds
 These funds invest in stocks. These funds aim to grow
faster than money market or fixed income funds, so there
is usually a higher risk that you could lose money.

14. Balanced funds
 These funds invest in a mix of equities and fixed income
securities. They try to balance the aim of achieving higher
returns against the risk of losing money.

15. Specialty funds
 These funds focus on specialized mandates such as
real estate, commodities or socially responsible
investing. For example, a socially responsible fund
may invest in companies that support environmental
stewardship, human rights and diversity, and may
avoid companies involved in alcohol, tobacco,
gambling, weapons and the military.

16. Fund-of-funds
 These funds invest in other funds. Similar to balanced
funds, they try to make asset allocation and diversification
easier for the investor. The MER for fund-of-funds tend to
be higher than stand-alone mutual funds.

17. The Advantages of mutual
fund investment

18. Diversification:
 A single mutual fund can hold a wide range of securities from
different issuing companies. Focus funds are on the lower end of the
spectrum and can hold little as 20 investments that the manager has
high conviction in. On the other hand, there are mutual funds that
hold thousands upon thousands of different investments. Generally a
mutual fund will have somewhere between 75-125 holdings.

19. Affordability:
 Many mutual funds set a relatively low dollar amount for initial investments
and subsequent purchases. For example, many fund families allow you to
begin buying units or shares with a small dollar amount (e.g. $500) for the
initial purchase. Some mutual funds also permit you to buy more units on a
regular basis with even smaller installments (e.g. $50 per month) allowing
you to invest small dollar amounts in many companies. This allows an
individual to own all of the underlying investments of the fund that may not
have been affordable to purchase individually.

20. Professional Management:
Many investors do not have the time or expertise to
manage their personal investments every day, to efficiently
reinvest interest or dividend income, or to filter through the
thousands of securities available in the financial markets.
Mutual funds are managed by professionals who are
experienced in investing money and who have the education,
skills and resources to research diverse investment
opportunities. Not only do they do the security selection, but
many will also monitor performance and make adjustments
with the changing economic and market cycles.

21. Liquidity
 Units or shares in a mutual fund can be bought and sold
on any business day (that the market is open), providing
investors with easy access to their money for the current
net asset value (NAV), minus any redemption fees,
usually within three business days of the transaction.

22. Flexibility:
 Many mutual fund companies manage several different
funds (e.g., money market, fixed-income, growth, balanced,
sector, index, international, global, alternative, allocation, target
date, etc.) and allow you to switch between these funds at little
to no charge. This enables you to change your portfolio balance
as personal needs, financial goals or market conditions change.

23. The Disadvantages of Mutual
Funds

24. Not tax-efficient
 Not tax-efficient: In a non IRA account, mutual funds will process capital
gain distributions about once per year, which you will then be taxed on,
even if you did not take any capital gains that year. The end investor has
little impact or say on how much a fund will decide to spit out in capital
gain distributions. The funds have the freedom to delay capital gain
distributions in some years, essentially kicking the can down the road for
later years. This could adversely impact you as the end investor.

25. Impersonal connection
 When investing in a mutual fund, you do not usually have
easy access to the one making the investment decisions.
There may be quarterly investor calls and updates, but
there will be a significant lack of interpersonal
communication with the main folks in charge of the fund.

26. Costs:
Mutual funds always carry some kind of costs. In all cases, costs
will decrease your overall rate of return. That is why it is important
to limit the annual expenses of mutual funds, the potential front-end
or back-end loads, and turnover costs. It takes more than a novice
investor to navigate these issues, but this is one of the most important
downsides to using mutual funds and thus, should certainly be
evaluated and address by all investors.

28. Mutual Fund Opertational
works?

29.  Step 1 Identify your investment needs
 1. What are my investment objectives and needs?
 2. How much risk am I willing to take?
 3. What are my cash flow requirements?
 Step 2 Choose the right mutual fund.
 1. The track record of performance over the last few years in relation to
the appropriate Benchmark and similar funds in the same category
 2. How well the mutual fund is organized to provide efficient, prompt
and personalized service.
 3. Degree of transparency as reflected in frequency an d quality of their
communications.
 Step 3 Select the ideal mix of schemes
 Investing in just 1 scheme may not meet all your investment needs. You
may consider investing in a combination of schemes to achieve your
specific goals.

30. Mutual Fund: How to buy?

31. Thank you