Download - The benefits of investing in mutual funds
Objective of the PresentationWhat is MF ?
How MF works ?Why invest in MF ?
How do you make money from mutual fund ?SIP and its power and benefits
How much should a MF be allocated in a portfolio
What is a Mutual Fund ?
.
Things which are “Mutual” in a Mutual Fund
Trust
Pool of Money
Investment Objectives
Risk & Returns
Mutual Fund is a Trust that Pools the Savings of a number of Investors,
having a common Financial Goal, and is collectively managed by an
Asset Management Company according to stated investment objectives.
How Mutual Fund works?
Why Mutual Fund ?Portfolio Diversification
TransparencyLiquidity
ConvenienceFlexibility
Low InvestmentMarket linked Returns
Return PotentialLow Cost
Professional ManagementReduction in Risk
Choice of SchemesWell Regulated
Tax Benefit
Buying a Mutual Fund is like buying a small slice of a big Pizza
Education Earning Years
Phase I Phase II Phase III
Age- 22 yrs Age- 60 yrs
MarriageChild birth
Child’s Education
Child’s Marriage
Housing
22 yrs 38 yrs 10- 20 yrs
Human Life Cycle
60Retirement
40Middle Age
27Young Married
22Young Independent
Individual Investor: Life Stages
EarningsConsumptionSavings
All individuals have a finite period to save for their investment goals
Value of Money over timeImpact of inflation on monthly expenses of Rs. 30,000 today
Value of Rs. 100,000 over time
At inflation of 5%
Investors need to beat inflation
30,00038,288
62,368
79,599
Today 5 years 15 years 20 years
100,000
78,353
48,10237,689
Today 5 years 15 years 20 years
Instrument Tax Benefit Return Duration
EPF √ 8.65% Long Term
PPF √ 8 % Long Term
NSC √ 8 % Long Term
FD’s – Banks & Post Office √ 7 % – 8 % Short Term
Senior Citizen Savings Scheme
√ 8.5 % Long Term
Mutual Funds √ Market Linked Long Term & Short Term
ULIP √ Market Linked Long Term
NPS (New Pension Scheme) √ Market Linked Long Term
Direct Equity √ Market Linked Long Term
Gold √ Market Linked Short Term
Real Estate √ Market Linked Long Term
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Terminologies Demystified…Asset Allocation
Diversifying investments in different assets such as stocks, bonds, real estate, gold ,
cash in order to minimize risk.
Fund Manager The individual responsible for making
portfolio decision for a mutual fund, in line with fund’s objective.
Fund Offer Document Document with investment objectives, risk
factors, expenses summary, how to invest etc.
Terminologies Demystified (contd.)Dividend
Profits given to the investor from time to time.
GrowthProfits ploughed back into scheme. This causes the NAV to rise.
NAV
Market value of assets of the scheme minus its liabilities.
How do you 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. Coupon / Dividend Income:
Fund will earn interest income from the bonds it holds or will have dividend income from the shares
How do you make money from a mutual fund?3. Income Distribution:
The fund passes on the profits it has earned in the form of dividends
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.
A Systematic Investment Plan (SIP) is an investment plan that allows an individual to invest regularly a fixed amount at a specified frequency say, monthly or quarterly
>> A Recurring Deposit in Mutual Funds
Systematic Investment Planning (SIP)
•It is a method of investing regularly to benefit from the stock market volatility and take the benefit of Rupee Cost Averaging.
•Convenient and Hassle-Free - Automatic investments, one-time instruction.
•Forced Saving : Small amount invested every month to become a huge sum after some years.
•Light on the wallet.
•Become a disciplined Investor – Setting aside and invest a fixed sum of money.
• It is the small drops that make an ocean - Your money earns more money for you – Compounding Effect
• Relieves you of the last minute pressure• Slow and steady wins the race - SIP helps wins over Lump sum in Volatile
Markets• Reduces the risk of investing at the wrong time - By investing in the markets
without taking a call on what is the ‘Right’ time.• Investing a fixed sum at fixed intervals we can bring down the average cost
per unit. This is called Rupee Cost Averaging.• SIP takes care that your average price works out to be lower than the price
you would have paid at the market peak (illustrated in the chart)
Start Early : SIPStarting Age Total Amount Saved Value at the age of
60
25 4,20,000 23,09,175
30 3,60,000 15,00,295
35 3,00,000 9,57,367
40 2,40,000 5,92,947
......the sooner you start, makes a difference!
KBC – Kaise Banoge Crorepati ?
Scenario 1 : A Child is born (be it a Girl or a Boy)……Celebrate her / his birth by starting a SIP of Rs.3000/=
pm…….They will be Crorepati at the age of 25 (assuming the return of 15% pa)Scenario 2 :
Start a savings of Rs.4000/= pm, the chances of becoming a Crorepati is much more, even @ 14%
Scenario 3 : Rs.4500/= would be required to make you a Crorepati @ 13%
Scenario 4 : You have to put Rs. 5000/= ina SIP if we assume @ 12%
THINK BIG !!!
Summing Up…… Mutual Funds are the best way to en-cash the upside potential of Equity Markets A Long-term horizon is important for successful investing in Equity Funds. While equity
investments may be volatile in the short-term, they have the potential to deliver superior returns over a period of time.
Trying to time the market is a good idea, but only in hindsight. It’s the time one gives an investment that matters, and not timing.
The decision to sell must be clearly based on a specific need. Start Early & Investing regularly through SIP can help stabilize long term returns and
create Wealth. Harness the power of compounding by choosing Growth option
Thanks