PRESENTED BY:

PUJIL KHANNA
AVINASH JESWANI
ROBIN CHOUDHARY
We always think , where
should we invest our
money in financial
market
 A Mutual Fund is a trust that pools the savings of a number of investors
who share a common financial goal.

 The money thus collected is then invested in capital market instruments

such as shares, debentures and other securities.

 The income earned through these investments and the capital

appreciation realized are shared by its unit holders in proportion to the
number of units owned by them.

 Thus a Mutual Fund is the most suitable investment for the common man
as it offers an opportunity to invest in a diversified, professionally
managed basket of securities at a relatively low cost.
How MF help the financial planning
objectives of investors?
• Mutual fund comprises of 29 funds, offering nearly 500 products with
total AUM of over Rs.1,58,000 Cr as of April 2005

• Competition in industry has led to innovative alterations to standard

products

• Investors can choose the manner in which their returns would be

distributed

• Investors can choose options that suit their return requirements and risk
profile
 What are the important phases in history of mutual
funds in India?
1963-1987 UTI sole player in the industry,created by an Act of Parliament ,1963
UTI launches first product Unit Scheme 1964
UTI creates products such as MIP's, childrens plans ,offshore funds etc
UTI managed assets of 6700 Cr at the end of this phase

1987-1993 In 1987 Public Sector Banks and FI's

SBI mutual fund was the first non -UTI mutual fund
UTI's corpus grew to Rs.38,247 Cr and public Sector Funds managed Rs 8750 Cr

1993-1996 In 1993, Mutual Fund Industry was open to private players.

SEBI's first set of regulations for the industry formulated in 1993
Significant innovations, mostly initiated by private players

1996-1999 Implementation of new SEBI regulations led to rapid growth

Bank mutual funds were recast as per SEBI guidelines
UTI came under voluntary SEBI supervision.

1999-2000 Rapid growth, significant increase in corpus of private players

Tax break offered created arbitrage opportunities
Bond funds and liquid funds registered highest growth
UTI's market share drops to nearly 50%
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 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
 By Structure
 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)
 Liquid/Money Market (including gilt) – Short-term Money Market
(Govt.)
 Balanced/Hybrid – Stocks + Fixed Income Securities (1-3 years)

 Other Schemes
 Tax Saving Schemes
 Special Schemes
 ULIP
 Draw up your asset allocation
 Financial goals & Time frame (Are you investing for retirement? A
child’s education? Or for current income? )
 Risk Taking Capacity

 Identify funds that fall into your Buy List

 Obtain and read the offer documents

 Match your objectives

 In terms of equity share and bond weightings, downside risk
protection, tax benefits offered, dividend payout policy, sector focus

 Check out past performance

 Performance of various funds with similar objectives for at least 3-5
years (managed well and provides consistent returns)
 Think hard about investing in sector funds
 For relatively aggressive investors
 Close touch with developments in sector, review portfolio regularly

 Look for `load' costs

 Management fees, annual expenses of the fund and sales loads

 Does the fund change fund managers often?

 Look for size and credentials

 Asset size less than Rs. 25 Crores

 Diversify, but not too much

 Invest regularly, choose the S-I-P

 MF- an integral part of your savings and wealth-building plan.
1.Mutual Funds Offer Diversification
The beauty of a mutual fund is that you can buy a mutual fund and obtain
instant access to a hundreds of individual stocks or bonds.

2. Mutual Funds are Professionally Managed

Many investors don’t have the resources or the time to buy individual stocks.
Investing in individual securities, such as stocks, not only takes resources, but a
considerable amount of time. By contrast, mutual fund managers and analysts
wake up each morning dedicating their professional lives to researching and
analyzing current and potential holdings for their mutual fund.

3. Mutual Funds Offer Automatic Reinvestment

An investor can easily and automatically have capital gains and dividends
reinvested into their mutual fund without a sales load or extra fees.
4. Mutual Funds Offer Transparency
Mutual fund holdings are publicly available (with some
delays in reporting), which ensures that investors are getting
what they pay for.
5. Mutual Funds Are Liquid
If you want to sell your mutual fund, the proceeds from the
sale are available the day after you sell the mutual fund.
6. Mutual Funds Have Audited Track Records
A mutual fund company must maintain performance track
records for each mutual fund and have them audited for
accuracy, which ensures that investors can trust the mutual
fund’s stated returns.
7. Safety of Investing in Mutual Funds
If a mutual fund company goes out of business, mutual fund
shareholders receive an amount of cash that equals their
portion of ownership in the mutual fund. Alternatively, the
mutual fund’s Board of Directors might elect a new
investment advisor to manage the mutual fund.
Mutual Funds and Poor Trade Execution
No Tailor-made-Portfolios

Managing a Portfolio of Funds

No control over costs

Domestic Mutual Funds (MF) Industry will grow at CAGR of 30% in
next 3 years to touch its level at Rs. 9.50 lakh crore from Rs.4.67 lakh
crores in July 2007 with contributions of private, public and joint
sector mutual funds players, staying around respectively 70%, 20%
and 10%, according to The Associated Chambers of Commerce and
Industry of India (ASSOCHAM).
Indian mutual funds’ assets under management (AUM) grew by
Rs.860 billion in the month of July, to a corpus of Rs.4.89 trillion,
according to crisil. Growth of this magnitude in a single month has
rarely been seen in the Indian mutual fund industry. According to
CRISIL, “The large number of new fund offerings, the sharp rally in
the equity markets, and liquid fund inflows, drove these levels of
AUM growth.”
Reliance Mutual Fund continued to top the AUM chart with AUM in excess
of Rs.660 billion, while ICICI Prudential Mutual Fund took the second spot
with AUM of Rs.487 billion. UTI Mutual Fund was third with AUM of
Rs.425 billion. In the secondary market, mutual funds were net sellers to the
extent of Rs.9 billion in July, after being net buyers of Rs.7 billion in June.
 Risk Hierarchy of Mutual Funds

Risk
Level

Equity
Funds
Balanced
Funds
Diversified
Debt Funds
Gilt Funds
Money Market
Funds
Type of Fund

IILM 11/27/09
Thank
You