Mutual Funds By Mrs.Lalitha PPM


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Mutual Funds By Mrs.Lalitha PPM

  1. 1. Mutual Funds By Mrs.Lalitha PPM
  2. 2. What is Mutual Fund? <ul><li>A Mutual Fund is an investment vehicle that pools the money of several investors and invests it in different securities. </li></ul>
  3. 3. Organisation of Mutual Fund
  4. 4. Some Concepts Clarified….. <ul><li>NAV - N et asset value is the market value of a unit of a scheme after accounting for all expenses on any given business day. </li></ul><ul><li>Load </li></ul>
  5. 5. Load <ul><li>Charged directly to the investor </li></ul><ul><li>Includes Agent’s commission, Marketing and Selling expenses </li></ul><ul><li>Front end Load and Back end Load </li></ul><ul><li>Entry loads vary between 1.00% and 2.5%. </li></ul><ul><li>Exit loads vary between 0.25% and 3.00%. </li></ul><ul><li>Regulations do not allow either front-end load or back-end load in any combination to be higher than 6%. </li></ul>
  6. 6. …….Some Concepts Clarified <ul><li>Purchase price is the price paid by a customer to purchase a unit of the fund. </li></ul><ul><li>Redemption price is the price received by the customer on selling units of an open-ended scheme to the fund. </li></ul><ul><li>Repurchase price is different from redemption price and refers to the price at which a close-ended scheme repurchases its units. </li></ul><ul><li>Expense ratio </li></ul>
  7. 7. Expense Ratio <ul><li>Operating Expenses paid out of the fund’s earnings </li></ul><ul><li>Includes advisory fees paid to investment managers, audit fees, custodial fees, transfer agent fees, trustee fees etc. </li></ul><ul><li>Advisory fees range from 1% to 1.5% of the corpus </li></ul><ul><li>Limits mandated by SEBI </li></ul><ul><li>First Rs. 100 crores 2.50% 2.25% </li></ul><ul><li>Next Rs. 300 crores 2.25% 2.00% </li></ul><ul><li>Next Rs. 300 crores 2.00% 1.75% </li></ul><ul><li>On the balance of assets 1.75% 1.50% </li></ul><ul><li>The annual expense expressed a percentage of the fund's average daily net assets. </li></ul>
  8. 8. Exploding a Myth-A Fund with lower NAV is cheaper than that with higher NAV <ul><li>A Mutual Fund with lower NAV will give better returns !!!!!! </li></ul>
  9. 9. Classification Of Mutual Fund <ul><li>By Asset Class </li></ul><ul><li>By Investment Sector </li></ul><ul><li>By Liquidity </li></ul><ul><li>By Trading Strategy </li></ul><ul><li>By Investment Strategy </li></ul><ul><li>By Security Selection </li></ul><ul><li>By Load Charged / Cost </li></ul><ul><li>By Place of origin </li></ul>
  10. 10. WHY Choose Mutual Funds? <ul><li>Professional Management </li></ul><ul><li>Lower Risk </li></ul><ul><li>A better portfolio for less Money </li></ul><ul><li>Lower Transaction Cost </li></ul><ul><li>Liquidity </li></ul><ul><li>Transparency </li></ul><ul><li>Affordability </li></ul><ul><li>Choice of Schemes </li></ul><ul><li>Well Regulated </li></ul>
  11. 11. Ground Rules of Mutual Fund Investing <ul><li>Define your Investment Objectives </li></ul><ul><li>Draw up your Asset Allocation </li></ul>
  12. 12. ….Ground Rules of Mutual Fund Investing <ul><li>Identify Funds with matching Investment objectives. </li></ul><ul><li>Evaluate Past Performance, look for Consistency </li></ul><ul><li>Diversify </li></ul><ul><li>Consider Fund Costs </li></ul><ul><li>Factor Tax Implications </li></ul>
  13. 13. Tax Implications – on Dividend Equity Oriented Scheme Nil Nil Debt Oriented Scheme Nil 12.5% + Surcharge + Cess -> 14.025% Mutual Fund Scheme TDS Dividend Distribution Tax
  14. 14. Tax Implications – on Capital Gains Equity Oriented Scheme Debt Oriented Scheme TAX NIL Lower of - 10% without indexation - 20% with indexation LTCG 10 % Marginal Rate of Taxation STCG 0.2 % Nil STT
  15. 15. Which Option to Choose? Growth Dividend Payout Mutual Fund Scheme 0% < 10% Profit Booking <ul><li>Equity Oriented Scheme </li></ul><ul><li>< 1 Year </li></ul><ul><li>> 1 Year </li></ul>10%or20%(WI)<14.025% 14.025 % <30% <ul><li>Debt Oriented Scheme </li></ul><ul><li>< 1 Year </li></ul><ul><li>>1 Year </li></ul>
  16. 16. ….Ground Rules of Mutual Fund Investing <ul><li>Look for Size and Credentials </li></ul><ul><li>Customer Service </li></ul><ul><li>Monitor regularly and Review </li></ul><ul><li>Invest Regularly </li></ul>
  17. 17. When To Sell Mutual Funds? <ul><li>The Fund Manager leaves </li></ul><ul><li>Below par performance for the last 2 years </li></ul><ul><li>Size of the corpus increases too fast </li></ul><ul><li>The Promoter of Mutual Fund is going through financial difficulties </li></ul><ul><li>The scheme changes its investment objectives </li></ul><ul><li>You change your plan </li></ul><ul><li>Enough has been earned </li></ul>
  18. 18. Systematic Investment Plan(SIP) <ul><li>Advantages </li></ul><ul><li>Disciplined investing </li></ul><ul><li>Convenience </li></ul><ul><li>Avoiding market prediction </li></ul><ul><li>Rupee Cost Averaging </li></ul>
  19. 19. Rupee Cost Averaging <ul><li>  </li></ul>
  20. 20. Advantages of Early Investing IRS 66,35,367.20/= IRS 1,37,82,803.88/= Growth (assume 15 % CAGR) IRS 12,00,000/= IRS 15,00,000/= Total Contribution 60 yrs 60 Yrs Investment Stopped @ IRS 5000 IRS 5000 Monthly Investment @ 40 Yrs @ 35 Yrs Investing in a Diversified MF - SIP
  21. 21. Mutual Fund Investing by NRIs <ul><li>Power of Active Funds Management </li></ul><ul><li>Online trading simplifies procedure </li></ul><ul><li>Some online trading sites </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li> </li></ul>
  22. 22. ICICIDirect one up on others. <ul><li>No Application forms to be filled up </li></ul><ul><li>Automatic debit from and credit to bank account </li></ul><ul><li>Automatic paperless SIP/SWP </li></ul><ul><li>Online order confirmations and status tracking </li></ul><ul><li>Online dividend payout / reinvestment facility </li></ul><ul><li>Online updation of portfolio of unit holdings at latest NAV </li></ul>
  23. 23. Few Mutual Funds NRIs can consider <ul><li>For Conservative investors </li></ul><ul><li>HDFC Top 200 Fund </li></ul><ul><li>Sundaram Growth </li></ul><ul><li>HDFC Prudence </li></ul><ul><li>Principal MIP </li></ul><ul><li>For Aggressive investors </li></ul><ul><li>HSBC Equity Fund </li></ul><ul><li>Franklin India Bluechip </li></ul><ul><li>FT India Balanced Fund </li></ul><ul><li>FT India MIP </li></ul>
  24. 24. Product Innovations <ul><li>Fund Of Funds is a fund that invests in other funds instead of securities. </li></ul><ul><li>Super SIP isn't a fund but a way of buying funds that combines long-term SIP with term insurance. </li></ul><ul><li>ETF is a hybrid financial product, a cross between a stock and a mutual fund . </li></ul>
  25. 25. ???