Majority from websites and some practical experience
Contents Keeping Track Buying a Mutual Fund Selecting a Mutual Funds Equity Funds Investment Strategies Risk Behavior Types of Schemes Organization of Mutual Fund Terminologies Demystified Brief History Reference Websites Mutual Fund Defined Regulations Mutual Funds Comparision Warning Signals
Mutual Fund ??
Form of trust that pools the funds of a whole lot of investors to make more money by investing in an array of financial instruments.
Advantages of a MF
Flexibility in choice - selection, redemption
1987- Public Sector banks, Insurance Companies
SBI, Canbank, PNB LIC, GIC
1993- Private Sector
Kothari Pioneer ( later merged with Franklin Templeton), J P Morgan, Morgan Stanley, George Soros and Capital International
Organization of a Mutual Fund
Governed by SEBI (Mutual Fund) Regulation 1996
All MFs registered with it, constituted as trusts ( under Indian Trusts Act, 1882)
Bank operated MFs supervised by RBI too
AMC registered as Companies registered under Companies Act, 1956
SEBI- Very detailed guidelines for disclosures in offer document, offer period, investment guidelines etc.
NAV to be declared everyday for open-ended, every week for closed ended
Disclose on website, AMFI, newspapers
Half-yearly results, annual reports
Select Benchmark depending on scheme and compare
Diversifying investments in different assets such as stocks, bonds, real estate, cash in order to optimize risk.
The individual responsible for making portfolio decision for a mutual fund, in line with fund’s objective.
Fund Offer Document
Document with investment objectives, risk factors, expenses summary, how to invest etc.
Profits given to the investor from time to time.
Profits ploughed back into scheme. This causes the NAV to rise.
Market value of assets of scheme minus its liabilities.
Per unit NAV = Net Asset Value
No. of Units Outstanding on Valuation date
Entry Load/Front-End Load (0-2.25%)
The commission charged at the time of buying the fund.
To cover costs for selling, processing
Exit Load/Back- End Load (0.25-2.25%)
The commission or charge paid when an investor exits from a mutual fund. Imposed to discourage withdrawals
May reduce to zero as holding period increases.
Sale Price/ Offer Price
Price you pay to invest in a scheme. May include a sales load. (In this case, sale price is higher than NAV)
Re-Purchase Price/ Bid Price
Price at which close-ended scheme repurchases its units
Price at which open-ended scheme
Types of Mutual Fund Schemes
Open-Ended – anytime enter/exit
Close-Ended Schemes – listed on exchange, redemption after period of scheme is over.
By Investment Objective
Equity (Growth) – only in Stocks – Long Term (3 years or more)
Debt (Income) – only in Fixed Income Securities (3-10 months)