why mutual fund final 14 may 2010
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Why Mutual Fund?
AMFI IAP (Association of Mutual Funds India Investor Awareness Program)
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Your Investment Menu Card
Instrument Tax
Benefit
Return Duration
EPF 8.50% Long Term
PPF 8% Long Term
NSC 8% Long Term
FDs Banks &Post Office 5.70 to 8.50% Short Term
Senoir CitizenSavings Scheme
9% Long Term
Mutual Funds Market Linked Long Term &Short Term
ULIP Market Linked Long Term
NPS Market Linked Long Term
Direct Equity Market Linked Long Term
Gold NA Market Linked Short Term
Real Estate Market Linked Long Term
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Cost of money lying idle
Your investment ought to beat the inflation !!!
Money in savings account + 100000
Interest earned in 1 year (@3.5 perannum)
+ 3500
103500
Tax on Interest (@30.9%) - 1081
Impact of Inflation (@5% per annum) - 5000
Value at the end of year 1 97419
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Challenges involved investing directly in
Capital Market
Requirement of Capital
Time
Expertise
Lack of Information Portfolio
Volatility
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Key Investment Considerations
Safety
You get your
money back
Liquidity
You get your money back when you want it
Plus Convenience
How easy is it to invest, disinvest
and adjust to your needs?Post-tax Returns
How much is really left for you post tax?
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What is Mutual Fund and Why Mutual Fund
A mutual fund is the trust that pools the savings of a number ofinvestors who share a common financial goal.
Anybody with an investible surplus of as little as a few hundred
rupees can invest in Mutual Funds.
The money thus collected is then invested by the fund manager indifferent types of securities. These could range from shares to
debenture, from Government Bond to money market instruments,
depending upon the schemes stated objective.
It gives the market returns and not assured returns.
In the long term market returns have the potential to perform
better than other assured return products.
Investment in Mutual Fund is the most cost efficient as it offers the
lowest charge to the investor
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How Mutual Fund works?A vehicle for investing in portfolio of stocks and bonds
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Structure of Mutual Fund
Custodian keeps safe custody of the investments (related documents of securities invested).
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Types of Mutual Funds
Types of
Mutual Funds
By
Constitution
By
Investment
Objective
Close Ended Open Ended Interval EquityFunds Cash FundDebt Funds
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Comparison : Mutual Funds vis--vis other
asset classes
256
284
130132
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Growth in Equity Funds: One time
investment (as on 30 April 2010)
Amount invested Rs. 1 lac
Fund Name Growth in 10 year Growth in 5 year Growth in 3 year
Grown to(Rs in lacs)
Return in %(CAGR)
Grown to(Rs in lacs)
Return in %(CAGR)
Grown to(Rs in lacs)
Return in %(CAGR)
Fund A 12.21 28.68 3.42 30.16 1.52 17.37
Fund B 11.87 28.32 3.42 30.31 1.58 18.87
Fund C 16.51 32.66 3.46 29.98 1.56 18.42
Fund D 9.15 25.00 3.12 27.10 1.56 18.90
Benchmark (CNX 500) 4.46 16.41 2.35 20.91 1.21 8.92
Benchmark (BSE Sensex) 3.92 14.88 2.59 23.30 1.19 8.16
The above figures are for illustration purpose only. Past performance does not indicate the future performance
of the schemes.
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Advantages of Mutual Funds
1.Professional Management
2.Diversification
3.Convenient Administration
4.Return potential
5.Low cost
6.Liquidity
7.Transparency
8.Flexibility
9.Choice of schemes
10.Well regulated
11.Tax benefits
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How do I make money from a mutual fund?
1. Capital appreciation:
As the value of securities in the fund increases, the fund's unit
price will also increase. You can make a profit by selling the units
at a price higher than at which you bought .
2. Income Distribution:
The fund distributes part of the appreciation to the investors as
dividend.
DisclaimerAs the value of securities in the fund increases, the fund's unit price will also increase. You can
make a profit by selling the units at a price higher than at which you bought. Although Mutual
Fund does not guarantee the same.
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Mutual Fund- How to invest in Mutual FundsSelection Process- 3 step process
Step 1 Identify yourinvestment needs
1. What are my investmentobjectives and needs?
2. How much risk am I willing totake?
3. What are my cash flow
requirements?
Step 2 Choose the right mutualfund.
1. The track record of performanceover the last few years in relationto the appropriate Benchmark andsimilar funds in the same category
2. How well the mutual fund isorganized to provide efficient,prompt and personalized service.
3. Degree of transparency asreflected in frequency an d qualityof their communications.
Step 3 Select the idealmix of schemes
Investing in just 1 schememay not meet all yourinvestment needs. Youmay consider investing in acombination of schemes to
achieve your specific goals.
Please ask your financialadvisor for details & advise
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Mutual Fund- Which one to buy?
Your Investment
goal
Capital
PreservationGenerate Income Capital
Appreciation
Disclaimer
As the value of securities in the fund increases, the fund's unit price will also increase. You can make a profit by selling theunits at a price higher than at which you bought. Although Mutual Fund does not guarantee the same.
Based on your goals and
risk tolerance
Savings Bank Account Fixed Deposits Real Estate
PPF Post office Monthly Income Scheme Gold
Cash Funds Debt Funds Equity FundsMutual Funds
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Mutual Fund Products Risk / Return Graph
Lo Med Hi
Liquid fund
Ultra Short Term Funds
Short Term Funds
GILT & Bond Funds
Hybrid & MIP
Lo Med Hi
Index Fund
Arbitrage Funds
Balanced Funds
Diversified Funds (ELSS)
Sectoral FundsDebt Equity
>> Risk > Risk >Retu
rnRetu
rn
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