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Mutual funds
- 1. INVESTMENT ANALYSIS AND PORTFOLIO MANAGEMENT MUTUAL FUNDS What beginners needto know AKASH GHANATE 2018BBA01
- 2. POINTS TO BE COVERED Key points -Knowing the Basics - How do mutual funds work? - History of Indian Mutual Fund, - Types of Mutual Funds - Myths anf Facts of Mutual Fund
- 3. KNOWING THE BASICS What isa mutual fund? A mutual fund is a financial institution that pools money from many investors and invests the money in securities such as stocks, bonds, and short-term debt.
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- 5. Mutual funds poolmoney from the investing public and use that money to buy other securities, usually stocks and bonds. The value of the mutual fund company depends on the performance of the securities it decides to buy. So, when you buy a unit or share of a mutual fund, you are buying the performance of its portfolio or, more precisely, a part of the portfolio's value.
- 6. HISTORY OF THEINDIAN MUTUAL FUND INDUSTRY First Phase – 1964-87 Second Phase – 1987-1993 (Entry of Public Sector Funds) Third Phase – 1993-2003 (Entry of Private Sector Funds) Fourth Phase – since February 2003 The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank. The history of mutual funds in India can be broadly divided into four distinct phases:
- 7. FIRST PHASE –1964-87 Unit Trust of India (UTI) was established on 1963 by an Act Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management.
- 8. SECOND PHASE –1987-1993 (ENTRY OF PUBLIC SECTOR FUNDS) 1987 marked the entry of non- UTI, public sector mutual funds set up public sector banks and life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987.
- 9. THIRD PHASE –1993-2003 (ENTRY OF PRIVATE SECTOR FUNDS) With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families.
- 10. FOURTH PHASE –SINCE FEBRUARY 2003 In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was divided into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the end of January 2003. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations.
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- 12. Schemes according toMaturity Period A mutual fund scheme can be classified into open-ended scheme or close-ended scheme depending on its maturity period. Open-ended Fund Close-ended Fund An open-ended Mutual fund is one that is available for subscription and repurchase on a continuous basis. These Funds do not have a fixed maturity period. A close-ended Mutual fund has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme.
- 13. Fund according toInvestment Objective A scheme can also be classified as growth fund, income fund, or balanced fund considering its investment objective. Equity The aim of growth funds is to provide capital appreciation over the medium to long- term. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc.
- 14. Debt The aim ofincome funds is to provide regular and steady income to investors. Such funds are less risky compared to equity schemes Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Balanced Fund The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth.
- 15. Myths about MutualFunds Mutual Funds invest only in shares. Mutual Funds are prone to very high risks/actively traded. Mutual Funds are very new in the financial market. Mutual Funds are not reliable and people rarely invest in them. The good thing about Mutual Funds is that you don’t have to pay attention to them.
- 16. Facts about MutualFunds Equity Instruments like shares are only a part of the securities held by mutual funds. Mutual funds also invest in debt securities which are relatively much safer. Mutual Funds are there in India since 1964. Mutual Funds market has evolved in U.S.A and is there for the last 60 years. Mutual Funds are the best solution for people who want to manage risks and get good returns. Liquidity: Investors may be unable to sell shares directly, easily and quickly. When they invest in mutual funds, they can cash their investment any time by selling the units to the fund if it is open- ended and get the intrinsic value. Investors can sell the units in the market if it is closedended fund.
- 17. State Bank ofIndia mutual fund ICICI prudential mutual fund TATA mutual fund HDFC mutual fund Birla sun life mutual fund Reliance mutual fund Kotak Mahindra mutual fund etc.. VARIOUS MUTUAL FUNDS IN INDIA
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