Basics of Investing in Mutual Funds


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Benefits of Investing in Equity Market through Mutual Funds

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Basics of Investing in Mutual Funds

  1. 1. Mutual Funds SimplifiedMutual Funds Simplified
  2. 2. What is a Mutual Fund?What is a Mutual Fund? A Mutual Fund is a trust that pools the savings of anumber of investors who share a common financial goal. The money collected through a scheme is then investedin shares, debentures and other securities depending uponthe type of mutual fund. The income earned through these investments and thecapital appreciation are shared by you and other unit holdersin proportion to the number of units owned by each of you. It offers an opportunity for you to invest in a diversified,professionally managed basket of securities at a relativelylow cost.
  3. 3. Mutual Fund Operation Flow ChartMutual Fund Operation Flow Chart
  4. 4. Objective of a Mutual FundObjective of a Mutual Fund Mutual Fund’s objective varies from scheme to scheme.You can view the objective on the offer document upfrontFund Objective What the fund will invest inEquity (Growth) Only in stocksDebt (Income) Only in fixed-income securitiesMoney Market In short-term money market instrumentsBalanced Partly in stocks and partly in fixed-income securities
  5. 5. ….GroundGround Rules of Mutual FundRules of Mutual FundInvestingInvesting Identify Funds that match your Investment objectives. Evaluate Past Performance and compare with Peers Start by investing in diversified large cap funds Consider Fund Costs Factor in Tax Implications Look for Size and Credentials Monitor regularly and Review your portfolio Invest at Regular Intervals
  6. 6. Scan the Key DocumentsScan the Key DocumentsTwo key documents that highlight thefunds strategy and performance.The prospectus (legal document)Shareholder reports (normallyquarterly).
  7. 7. Types of SchemesTypes of Schemes By Structure Open Ended Schemes Close Ended Schemes Interval Schemes By Investment Objectives Growth Schemes Income Schemes Balance Schemes Money Market Schemes Other Schemes Tax Saving Schemes Special Schemes Index Schemes Sector Specific Schemes
  8. 8. Power of SIPAdvantagesDisciplined investingConvenienceAvoids timing the marketRupee Cost Averaging
  9. 9. Benefits of Starting EarlyBenefits of Starting EarlyInvesting in aDiversified MF -SIP@ 35 Yrs @ 40 YrsMonthlyInvestmentRs 5000 Rs 5000InvestmentStopped @60 Yrs 60 yrsTotalContributionRs 15,00,000 Rs 12,00,000Growth (assume15 % CAGR)Rs1,37,82,803.88Rs 66,35,367.20
  10. 10. Professional Money Management Fund managers dynamically manage yourcorpus through a consistent investmentstrategy. Fund managers monitor market and economictrends and analyze securities.Diversification Diversification is one of the best ways to reduce risk. Mutual funds offer investors an opportunity todiversify across various company stocks.Why Mutual Funds?Why Mutual Funds?
  11. 11. Benefits of Investing ThroughBenefits of Investing ThroughMutual FundsMutual FundsLiquidity Investors can sell their mutual fund unitson any business day. Receive the current market value on theirinvestments within a short time period(normally three- to five-days).Affordability The minimum initial investment for amutual fund s fairly low for most funds (aslow as Rs.500 ).
  12. 12. Benefits of Investing ThroughBenefits of Investing ThroughMutual FundsMutual FundsConvenience Convenience of periodic purchase plans, automatic withdrawalplans and the automatic reinvestment of interest anddividends. Reports and statements .Flexibility and variety Pick from conservative, blue-chip stock funds, Sectoral funds, Funds that aim to provide income with modest growth Those that take big risks in the search for returns. You can even buy balanced funds, or those that combinestocks and bonds in the same fund.
  13. 13. Evaluating the Firm’s FinancialEvaluating the Firm’s FinancialPositionPosition Financial statement analysis.Comparison to other similar firms.Forecast direction for future.Predict earnings and dividends.Risk evaluation.
  14. 14. When To Sell Mutual Funds?When To Sell Mutual Funds? Exit of the Fund Manager Below par performance for the last 2 years Size of the corpus increases too fast. The Promoter of Mutual Fund is going throughfinancial difficulties. The scheme changes its investment objectives. Change in your goals You have earned enough from the fund
  15. 15. Investing in Mutual Fund throughInvesting in Mutual Fund throughusus NSE has launched Mutual Fund Service System(MFSS). BSE Star allows you to trade in Mutual Fund. Buy and redeem units online through your tradingaccount. The units would be debited/credited to your demataccount.
  16. 16. For any further queries, visit ourwebsite or callour customer care @39019400Thank you