Published on October 15, 2008
Mutual Funds : Mutual Funds By Mrs.Lalitha PPM What is Mutual Fund? : What is Mutual Fund? A Mutual Fund is an investment vehicle that pools the money of several investors and invests it in different securities. Organisation of Mutual Fund : Organisation of Mutual Fund Some Concepts Clarified….. : Some Concepts Clarified….. NAV - Net asset value is the market value of a unit of a scheme after accounting for all expenses on any given business day. Load Load : Load Charged directly to the investor Includes Agent’s commission, Marketing and Selling expenses Front end Load and Back end Load Entry loads vary between 1.00% and 2.5%. Exit loads vary between 0.25% and 3.00%. Regulations do not allow either front-end load or back-end load in any combination to be higher than 6%. …….Some Concepts Clarified : …….Some Concepts Clarified Purchase price is the price paid by a customer to purchase a unit of the fund. Redemption price is the price received by the customer on selling units of an open-ended scheme to the fund. Repurchase price is different from redemption price and refers to the price at which a close-ended scheme repurchases its units. Expense ratio Expense Ratio : Expense Ratio Operating Expenses paid out of the fund’s earnings Includes advisory fees paid to investment managers, audit fees, custodial fees, transfer agent fees, trustee fees etc. Advisory fees range from 1% to 1.5% of the corpus Limits mandated by SEBI First Rs. 100 crores 2.50% 2.25% Next Rs. 300 crores 2.25% 2.00% Next Rs. 300 crores 2.00% 1.75% On the balance of assets 1.75% 1.50% The annual expense expressed a percentage of the fund's average daily net assets. Exploding a Myth-A Fund with lower NAV is cheaper than that with higher NAV : Exploding a Myth-A Fund with lower NAV is cheaper than that with higher NAV A Mutual Fund with lower NAV will give better returns !!!!!! Classification Of Mutual Fund : Classification Of Mutual Fund By Asset Class By Investment Sector By Liquidity By Trading Strategy By Investment Strategy By Security Selection By Load Charged / Cost By Place of origin WHY Choose Mutual Funds? : WHY Choose Mutual Funds? Professional Management Lower Risk A better portfolio for less Money Lower Transaction Cost Liquidity Transparency Affordability Choice of Schemes Well Regulated Ground Rules of Mutual Fund Investing : Ground Rules of Mutual Fund Investing Define your Investment Objectives Draw up your Asset Allocation ….Ground Rules of Mutual Fund Investing : ….Ground Rules of Mutual Fund Investing Identify Funds with matching Investment objectives. Evaluate Past Performance, look for Consistency Diversify Consider Fund Costs Factor Tax Implications Tax Implications – on Dividend : Tax Implications – on Dividend Tax Implications – on Capital Gains : Tax Implications – on Capital Gains Which Option to Choose? : Which Option to Choose? ….Ground Rules of Mutual Fund Investing : ….Ground Rules of Mutual Fund Investing Look for Size and Credentials Customer Service Monitor regularly and Review Invest Regularly When To Sell Mutual Funds? : When To Sell Mutual Funds? The Fund Manager leaves Below par performance for the last 2 years Size of the corpus increases too fast The Promoter of Mutual Fund is going through financial difficulties The scheme changes its investment objectives You change your plan Enough has been earned Systematic Investment Plan(SIP) : Systematic Investment Plan(SIP) Advantages Disciplined investing Convenience Avoiding market prediction Rupee Cost Averaging Rupee Cost Averaging : Rupee Cost Averaging Advantages of Early Investing : Advantages of Early Investing Mutual Fund Investing by NRIs : Mutual Fund Investing by NRIs Power of Active Funds Management Online trading simplifies procedure Some online trading sites www.icicidirect.com www.Indiainfoline.com www.Myiris.com ICICIDirect one up on others. : ICICIDirect one up on others. No Application forms to be filled up Automatic debit from and credit to bank account Automatic paperless SIP/SWP Online order confirmations and status tracking Online dividend payout / reinvestment facility Online updation of portfolio of unit holdings at latest NAV Few Mutual Funds NRIs can consider : Few Mutual Funds NRIs can consider For Conservative investors HDFC Top 200 Fund Sundaram Growth HDFC Prudence Principal MIP For Aggressive investors HSBC Equity Fund Franklin India Bluechip FT India Balanced Fund FT India MIP Product Innovations : Product Innovations Fund Of Funds is a fund that invests in other funds instead of securities. Super SIP isn't a fund but a way of buying funds that combines long-term SIP with term insurance. ETF is a hybrid financial product, a cross between a stock and a mutual fund . Slide 25: ???