Mutual Funds

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Mutual Funds

• By
• Mrs.Lalitha PPM

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What is Mutual Fund?

• A Mutual Fund is an investment vehicle that pools
  the money of several investors and invests it in
  different securities.

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Organisation of Mutual Fund
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Some Concepts Clarified..

• NAV - Net asset value is the market value of a
  unit of a scheme after accounting for all
  expenses on any given business day.
• Load

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Load

• Charged directly to the investor
• Includes Agents commission, Marketing and
  Selling expenses
• Front end Load and Back end Load
• Entry loads vary between 1.00 and 2.5.
• Exit loads vary between 0.25 and 3.00.
• Regulations do not allow either front-end load or
  back-end load in any combination to be higher
  than 6.

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.Some Concepts Clarified

• Purchase price is the price paid by a customer to
  purchase a unit of the fund.
• Redemption price is the price received by the
  customer on selling units of an open-ended scheme
  to the fund.
• Repurchase price is different from redemption
  price and refers to the price at which a
  close-ended scheme repurchases its units.
• Expense ratio

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Expense Ratio

• Operating Expenses paid out of the funds
  earnings
• Includes advisory fees paid to investment
  managers, audit fees, custodial fees, transfer
  agent fees, trustee fees etc.
• Advisory fees range from 1 to 1.5 of the corpus
• Limits mandated by SEBI
• First Rs. 100 crores 2.50 2.25
• Next Rs. 300 crores 2.25 2.00
• Next Rs. 300 crores 2.00 1.75
• On the balance of assets 1.75 1.50
• The annual expense expressed a percentage of the
  fund's average daily net assets.

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Exploding a Myth-A Fund with lower NAV is cheaper
than that with higher NAV

• A Mutual Fund with lower NAV will give better
  returns !!!!!!

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Classification Of Mutual Fund

• By Asset Class
• By Investment Sector
• By Liquidity
• By Trading Strategy
• By Investment Strategy
• By Security Selection
• By Load Charged / Cost
• By Place of origin

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WHY Choose Mutual Funds?

• Professional Management
• Lower Risk
• A better portfolio for less Money
• Lower Transaction Cost
• Liquidity
• Transparency
• Affordability
• Choice of Schemes
• Well Regulated

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Ground Rules of Mutual Fund Investing

• Define your Investment Objectives
• Draw up your Asset Allocation

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.Ground Rules of Mutual Fund Investing

• Identify Funds with matching Investment
  objectives.
• Evaluate Past Performance, look for Consistency
• Diversify
• Consider Fund Costs
• Factor Tax Implications

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Tax Implications on Dividend
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Tax Implications on Capital Gains
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Which Option to Choose?
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.Ground Rules of Mutual Fund Investing

• Look for Size and Credentials
• Customer Service
• Monitor regularly and Review
• Invest Regularly

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When To Sell Mutual Funds?

• The Fund Manager leaves
• Below par performance for the last 2 years
• Size of the corpus increases too fast
• The Promoter of Mutual Fund is going through
  financial difficulties
• The scheme changes its investment objectives
• You change your plan
• Enough has been earned

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Systematic Investment Plan(SIP)

• Advantages
• Disciplined investing
• Convenience
• Avoiding market prediction
• Rupee Cost Averaging

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Rupee Cost Averaging

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Advantages of Early Investing
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Mutual Fund Investing by NRIs

• Power of Active Funds Management
• Online trading simplifies procedure
• Some online trading sites
• www.icicidirect.com
• www.Indiainfoline.com
• www.Myiris.com

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ICICIDirect one up on others.

• No Application forms to be filled up
• Automatic debit from and credit to bank account
• Automatic paperless SIP/SWP
• Online order confirmations and status tracking
• Online dividend payout / reinvestment facility
• Online updation of portfolio of unit holdings at
  latest NAV

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Few Mutual Funds NRIs can consider

• For Conservative investors
• HDFC Top 200 Fund
• Sundaram Growth
• HDFC Prudence
• Principal MIP
• For Aggressive investors
• HSBC Equity Fund
• Franklin India Bluechip
• FT India Balanced Fund
• FT India MIP

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Product Innovations

• Fund Of Funds is a fund that invests in other
  funds instead of securities.
• Super SIP isn't a fund but a way of buying funds
  that combines long-term SIP with term insurance.
• ETF is a hybrid financial product, a cross
  between a stock and a mutual fund .

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