Why Invest ?To protect your purchasing powerTo generate sustained income post retirement.To meet key financial needs like housing, higher education and marriage of childrenTo generate alternate income for the family in case of any unforeseen event.

Where can you invest?

Equities

Bank Deposits, Debt, Bonds, Company Deposits

Gold, Real Estate

PPF, RBI Bonds, Postal Savings

Insurance Companies Insurance Policies

Product characteristics Matrix

ProductsReturnRiskLiquidityTax SavingsConven-ienceBank DepositModerateLowHighYesHigh

Equity InstrumentsHighHighDepends on the instrumentNoModerateDebenturesModerateModerateLowNoLowFixed Deposits by CompaniesModerate

ModerateLowNoModerate

BondsModerateModerateModerateYesModerate

Product characteristics Matrix

ProductReturnRiskLiquidityTax SavingsConven-ienceRBI Relief Bonds ModerateLowLowYesModerate

PPFModerateLowLowYesModerateNational Saving CertificateModerate

LowLowYesModerate

Life InsuranceModerateLowLowYesModerateMonthly Income SchemeModerateLowLowYesModerate

Income v/s Real IncomeReal Return = Returns Tax - InflationFocus on Real Income is important for wealth creation

What is Mutual Fund ? Mutual funds are investment companies that pool money from investors at large and offer to sell and buy back its shares on a continuous basis and use the capital thus raised to invest in securities of different companies.

Mutual Fund History1964-UTI

1987- Public Sector banks, Insurance CompaniesSBI, Canbank, PNB LIC, GIC

1993- Private SectorKothari Pioneer ( later merged with Franklin Templeton),Morgan Stanley

SPONSORTRUSTCUSTODIANREGISTRARAMCMutual Fund- StructureFUND MANAGERSOPERATIONSCOMPLIANCEMARKETINGINVESTORRELATIONSDISTRIBUTOR

Mutual Fund ProcessInvestorsMutual FundSECURITIESReturnsSEBI

Mutual fund TypesBy Liquidity or Structure : Open Ended Funds Closed Ended Funds Interval Funds

By Nature of Investments: Equity Funds Debt Funds Money Market Funds Hybrid Funds

By Investments Objective: Growth Funds For medium to long term capital appreciation.Income Funds - For generating regular income and preserving capital with lesser emphasis on capital appreciation.Value Funds for investing in undervalued equities

Mutual fund Types

Types of Equity Funds Diversified FundsTarget maximum capital appreciationMay trade or invest in mid & small stocksSpeciality FundsAggressive FundsE.g- Kotak Mid-cap, Kotak Opportunities Invests across sectors and stocks E.g- Kotak 30, Kotak LifestyleFunds that have an investment themeE.g- Kotak MNC, Kotak Global India, Kotak Lifestyle Diversifies stock or sector specific risksAre diversified but riskier than normal diversified funds Are diversified but riskier than normal diversified funds

Types of Equity fundsTax Saving FundsIndex Funds Invests exactly as per the benchmark index Risk and return are in line with the indexLock-in period of 3 YearsInvestments are eligible for tax deductionE.g- Kotak Tax SaverValue FundsInvests in currently under valued stocksHave low risk compared to growth fundsE.g- Kotak ContraSector FundsInvest only in one industryOffer no sector diversification hence riskyE.g- Kotak Tech

Types of Debt FundsMoney Market / Liquid FundsGilt FundsDebt / Income FundsFloating Rate FundsInvest in short term debt securities.Ideal for short term investments.Lowest in the order of risk level.Invests in govt. securities with medium tolong term maturities.Have a very low credit risk.Invests in debt securities issued by various players including govt. and private companies.Invest across various maturities.May be diversified, focused or have fixed maturities.Invest in securities with variable int. rates.Ideal in a rising rate scenario.

Types of Hybrid FundsGrowth & Income FundsLess risky than growth funds but more risky than Income fundsInvests in Equity and Debt markets Balance funds & MIPs E.g- Kotak Balance, Kotak Income PlusAsset Allocation FundsInvests in debt and equity based on an asset allocation policyMay follow variable asset allocation and move in and out of asset classesE.g- Kotak Dynamic FOF, Kotak Flexi FOF

Risk-return matrixThere is no such thing as a free lunchRisk shares a direct relationship with returns

Benefits of Mutual FundsDIVERSIFICATION Available even in small amountsPROFESSIONALMANAGEMENTBest Brains in the Country Manage your MoneyDIFFERENT SCHEMESProviding Solutions For All NeedsWELLREGULATEDGoverned By SEBI RegulationsTRANSPARENCYDaily NAV, Monthly PortfolioCONVENIENCEEasy to buy,hold & sell

Benefits of Mutual Funds Dividend from equity funds are entirely tax free

Dividend from debt funds - tax free for investors

Capital gain tax for equity funds : If kept > 1 year then zero tax

Capital gain tax for Debt Funds : Benefit of lesser tax by two options :1. 10 % without indexation2. 20 % with indexation

Benefit of set off for capital gains or loss upto 8 years

Equity - ConceptsPrice/Earning Ratio price of the share divided by earnings per share. indicates what the investors are willing to pay for the companys earning potential. Young or fast growing companies have high P/E ratio. Established companies in mature industries have lower P/E ratio.

Dividend Yield ratio of dividend paid per share to current market price. low P/E stocks usually have high dividend yields.

Equity - ConceptsCyclical stocks Earnings are related to the state of the economy Have relatively low P/E and high dividend pay outs

Growth Stocks Earnings are expected to grow at a higher than expected market rate Tend to reinvest earning and have a high P/E ratios

Value Stocks Stocks that are currently undervalued i.e. have a relatively low P/E Give returns in the long term when market realises their potential

Debt - ConceptsPar Value is the principal amount the investors will be paid upon maturity of the bond and is also known as the face value.

Coupon is the annual rate of interest paid on the par value of the bond to the investor.

Maturity refers to the term of the bond I.e. the date on which the issuer has to repay the principal amount to the bond.Current Yield Relates interest on a bond to its current market price by dividing annual coupon interest rate by the coupon market price.Yield to Maturity is the annual rate of return an investor would realize if he bought a bond at a particular price, received all the coupon payments, reinvested the coupons at the same YTM rate and received principal at maturity.

Debt - ConceptsInterest rates and debt prices share an inverse relationshipInterest Rates Bond pricesInterest Rates Bond pricesWhen interest rates go up the value of existing debt papers go down as another paper with a higher rate is available in the market. So the existing paper would have to be sold at a discount and vice-versa.

Investment Process or Financial Planning ProcessInvestor ProfilingProduct SelectionExecution & ServicingPortfolio Tracking & RebalancingAsset AllocationPortfolio Construction

Model Asset AllocationThe above asset allocation is for illustration purpose onlyAggressive PortfolioModerate PortfolioConservative PortfolioAge- 25-35YRSAge- 35-55YRSAge- 55YRS +

Chart3

751510

503515

354520

Equity Funds

Fixed Income funds/ Banks FD's

Cash/ Liquid Funds/ Savings A/c

Sheet1

Aggressive PortfolioEquity Funds755035

Moderate PortfolioFixed Income funds/ Banks FD's153545

Conservative PortfolioCash/ Liquid Funds/ Savings A/c101520

Sheet1

751510

503515

354520

Equity Funds

Fixed Income funds/ Banks FD's

Cash/ Liquid Funds/ Savings A/c

Sheet2

Sheet3

InvestorsHigh ReturnsLow ReturnsHigh RiskLow Risk Aggressive Investor( Kotak Opportunities, Kotak Midcap)

Conservative InvestorIrrational Investor Savvy Investor (Kotak 30)(Kotak MIP, Kotak Debt Funds )

Securities Transaction Tax : 0.25% on redemption value. Wealth Tax : Mutual Fund Units are exempt from wealth tax.

TAX RECKONER FOR MUTUAL FUND

Sheet1

Equity SchemeOther SchemesDividend IncomeDivident Distribution Tax

STCGLTGCTDSSTCGLTGCTDSEquity SchemesLiquidOthers

Resident Individual / HUF15%NilNilAs per tax slab10% without indexation or 20% with indexationNilTax FreeNil28.33%14.16%

Partnership Firm15%NilNil30%10% without indexation or 20% with indexationNilTax FreeNil28.33%22.66%

Domestic Company15%NilNil30%10% without indexation or 20% with indexationNilTax FreeNil28.33%22.66%

NRI15%Nil16.99%As per tax slab10% without indexation or 20% with indexationSTCG - 30% & LTCG - 20% after indexationTax FreeNil28.33%14.16%

Sheet2

Sheet3

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