Mutual funds
Upcoming SlideShare
Loading in...5
×
 

Like this? Share it with your network

Share

Mutual funds

on

  • 1,842 views

 

Statistics

Views

Total Views
1,842
Views on SlideShare
1,842
Embed Views
0

Actions

Likes
1
Downloads
83
Comments
0

0 Embeds 0

No embeds

Accessibility

Categories

Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

Mutual funds Presentation Transcript

  • 1. MUTUALFUNDSas an INVESTMENT vehicle
    K K JINDAL
  • 2. What is a mutual fund?
    A mutual fund is a common pool of money into which investors place their contributions that are to be invested in different types of securities in accordance with the stated objective
    Each investor has a right to a proportional share of the assets of the fund and any income it earns
    Company sells shares to the public and invests the proceeds in a pool of securities
    Jointly owned by the fund’s investors
    Invested according to the objective of the fund
  • 3. Operations Flow Chart
    Operations Flow Chart
    (Reference: amfiindia.com)
    Mutual Funds
  • 4. Fund Sponsor
    Trustees
    Asset Management Company
    Depository
    Agent
    Custodian
    Fund Structure
  • 5. Advantages of Mutual Funds
    Diversification
    Professional Management
    Ease of buying and selling
    Small amount of money required to open an account
    Multiple withdrawal options
    Distribution or reinvestment of income and capital gains
    Switching privileges in fund family
    Multiple services
  • 6. Disadvantages of Mutual Funds
    Purchase and withdrawal costs
    Management fees
    Potential poor performance
    No control over capital gains distribution
    Complicated tax reporting issues
    Potential market risk with all investments
    Aggressive or unethical sales personnel
  • 7. Computing Net Asset Value
    For investors, the performance of their investment depends on what happens to the fund’s per share value, or net asset value (NAV)
    NAV= Market Value of Assets – Liabilities
    Number of Shares Outstanding
  • 8. Mutual Fund Returns
    Three sources of return:
    Income distributions (ID)
    Bond interest, stock dividends
    Capital gain distributions (CGD)
    Realized gains/losses from selling assets
    Changes in NAV (NAV)
    From unrealized gains/losses from assets
  • 9. Closed-end and Open-end Funds
    13-6
    Closed-end funds
    Shares are issued by an investment company only when the fund is originally set up
    After all original shares are sold you can only purchase shares from another investor
    Open-end funds
    Shares are issued and redeemed by the investment company at the request of investors.
    Investors can buy and sell shares at the net asset value.
  • 10. Load Vs. No-load Funds
    Marketing a new mutual fund scheme involves initial expenses. These expenses are charged to the investors through loads and are recovered from the investors in different ways:
    Front-end or entry load is charged to the investor at the time of his entry into the scheme.SEBI has since disallowed this load
    Back-end or exit load is charged to the investor at the time of his exit from the scheme.
    Deferred load is charged to the investor over a period of time.
    Contingent deferred sales charge: Different amount of loads are charged to the investor depending upon the time period the investor has stayed with the fund. The longer he stays with the fund, lesser the amount of exit fund he is charged.
    Very often, AMC’s do not charge any initial expenses to the investor in the IPO. These are hence are no-load funds. In no-load funds, the investors get units for the complete amount invested.
  • 11. Types of Mutual Funds
    Funds classified according to the type of security in which they invest
    Examples:
    Stock Funds
    Taxable Bond Funds
    Municipal Bond Funds
    Stock and Bond Funds
    Money Market Funds
  • 12. Common Stock Funds
    Most popular type of fund
    Wide variety with different objectives and levels of risk
    Growth
    Industry or sector funds
    Geographic areas
    International or Global
    Equity Index funds
  • 13. Bond Funds
    Generally seek to generate current income with limited risk
    Can vary by maturity
    Short-term, Intermediate-term, Long-term
    Can vary by type of bond
    Government
    Corporate
    Municipal
    International/Global
    Bond Index funds
    Infrastructure funds
    Life style fund
  • 14. Stock and Bond Funds
    Seek to provide a combination of income and value appreciation
    Different names
    Balanced funds
    Hybrid funds
    Flexible funds
    Asset Allocation funds
  • 15. Money Market Funds
    Provide safe, current income with high liquidity
    Invest in money market securities
    T-bills, Bank CD’s, Commercial paper, etc.
    Provide an alternative to bank deposits
  • 16. Risk-Return Tradeoff
  • 17. Total
    Assured Return
    Close End
    Open End
    Structure
    Nature
     
     
     
     
    4323
    Balanced
    -
    790
    3533
    539
    ELSS
    1761
    -
    1222
    Gilt
    5955
    -
    -
    5955
    23022
    -
    1498
    21524
    Growth
    64571
    Income
    65396
    -
    825
    45200
    -
    -
    45200
    Liquid/Money Market
    141322
    Total
    145657
    -
    4335
    Assets Under Management as on February29, 2004
    Amount in Rs. Crores
  • 18. Mutual Fund Prospectus
    Must be available to and should be reviewed by investors
    Contains:
    Fund’s investment objective
    Investment strategy
    Principal risks faced by investors
    Recent investment performance
    Expenses and fees
  • 19. Mutual Fund Investment Strategies
    Choose in funds consistent with your objectives, constraints, and tax situation
    Consider index funds for a large portion of your fund portfolio
    When possible, invest in no-load funds with below-average expense and turnover ratios
    Invest. Don’t speculate.
    Be regular
    Own funds in different asset classes and consider life-cycle investing
  • 20. When should you sell?
    Personal considerations
    Portfolio rebalancing
    Be aware of capital gains with selling fund shares
    Fund considerations
    Change in portfolio manager
    Change in investment style
    Fund is growing “too large” or “too fast”
    Persistent bad performance
  • 21. references
    Investments, Fifth Edition, William F. Sharpe
    ICRA Money and Finance
    www.mutualfundsindia.com
    www.amfiindia.com
    www.nseindia.com
    www.moneycontrol.com
  • 22. Thank you