Why Mutual Fund Final 14 May 2010

8/9/2019 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
http://www.inkcinct.com.au/Web/CARTOONS/2008/2008-004--inflation-and-the-economy.jpg


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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).
http://www.thestayathomemother.com/sites/default/files/u3/goodnews.jpg


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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

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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)


Return in %(CAGR)


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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Why Mutual Fund Final 14 May 2010