The document provides an overview of mutual funds, including: - Mutual funds allow investors to pool their money together with a common investment goal and have a professional fund manager invest the money. - Investors purchase units of the mutual fund, which are valued based on the fund's net asset value which is calculated daily. - Mutual funds offer benefits like diversification of risk, liquidity, potential tax benefits, and professional management of the invested funds. - A fund manager is responsible for investing the pooled funds into various securities to generate returns for investors.

1. Mutual Funds Basics

2. Concept of pooling… Many people come together Contribute to a common fund With a common goal / objective

3. Examples of pooling Pooling for buying a gift (Contribution) Pooling for a party Pooling for the Gujrat earthquake relief fund Pooling for investments

4. Concept of units A tin of rasogulla costs Rs.40. Each tin consists of 12 rasogullas 4 friends pool in Rs.10 each for buying one dozen of rasogulla Cost of each rasogulla is Rs.3.33

5. What is a mutual fund ? A Mutual fund is a collective investment that allows many investors, with a common objective, to pool individual investments that are given to a professional manager who in turn would invest this money in line with the common objective.

6. INVESTORS Pool their money Passed back to RETURNS FUND MANAGER Invest in Generate SECURITIES Mutual fund operation flow chart

7. Mutual fund structure Unit holders Sponsor Trustee AMC The mutual fund Transfer agent Custodian SEBI

8. Mutualfunds: A packaged product Professional management Liquidity Convenience Diversification Tax benefits

9. Liquidity Direct withdrawal from the mutual fund Buying and selling can also be done through the stock exchange

10. Diversification Minimizes value erosion Potential losses are shared with other investors Portfolio of investments spreads out risk

11. Tax benefits Exemption up to Rs.100000 under section 80C Dividends are tax free in the hands of the investors No long term capital gains tax in equity mutual funds

12. Convenience Easy way to invest and withdraw Reduces excessive paperwork Online buying and selling of mutual funds

13. Professional management Highly qualified fund managers More focused approach Strong and dedicated research team

14. Fund manager A highly trained investment professional With a vast investment experience Functions of a fund manager: Investing the assets of a mutual funds Implementing investment strategy Managing the day-to-day portfolio trades

15. New Fund Offer (NFO) Whenever a new scheme is launched by a fund house, the offer made during that initial period is known as New Fund Offer Units are offered at fixed price

16. Net Asset Value (NAV) NAV is the total value of the fund's portfolio less liabilities. NAV = Asset value Number of outstanding units The NAV or Net Asset Value is usually calculated on a daily basis

17. Load Entry load Exit load Load is a charge on the NAV Entry load is charged on NAV and increases the sale price Exit load is charged on NAV and reduces the repurchase price Load is defined as a percentage of NAV Loads are subject to SEBI Regulation and vary depending on industry practice

18. Entry load : Example The entry load (sales load) for a scheme was 2.25% and the NAV of the scheme is Rs. 10. An investor who wanted to buy the units would not be able to buy at Rs. 10. He would have paid … = 10 + (10*2.25/100) = 10 + 0.225 = 10.225 With effect from …. Entry Load on MF Schemes have been removed.

19. Exit load : Example If a fund imposes an exit load of 2.25%, the investor who sells his units, will get a price that is: ( assuming the current NAV Rs.10) = 10 – (10*2.25/100) = 10 – 0.225 = Rs. 9.775

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