MUTUAL FUNDS

MUTUAL FUNDS : 

MUTUAL FUNDS

Why Mutal Funds? : 

Why Mutal Funds? The driving force of mutal fund->safety of principal guarenteed +Capital Appreciation+Income earned with interest or dividend Why people preferring MF than Bank deposit or LIC? Bcoz with a little money ,they can get into the investment game Thus MF acts as a gateway between companies & investors with his small investment.

What is Mutal fund? : 

What is Mutal fund? As per SEBI definition,”A fund established in the form of a trust by a sponsor,to raise money by the trustees thru the sale of units to the public,under one or more schemes ,for investing in securities in accordance with the sebi regulations.” In simple words,”a mutual fund collects the savings from the small investors,invest them in Govt or corporate securities & earn income thru interest or dividend ,besides capital gain”

Difference b/w shares & units in MF : 

Difference b/w shares & units in MF Investment in equity share represents investments in a particular company alone.But in MF investment refers to parts of shares of a large number of companies. If a particular company fails ,then share holder will suffer a lot,ButMF holders are able to withstand that risk by means of their diversified companies. Equity investment is a vehicle for speculators,But MF is a vehicle for genuine & conseravtive investor.

NET ASSET VALUE(NAV) : 

NET ASSET VALUE(NAV) Market value of each unit of a particular scheme in relation to all the assets of the scheme. Otherwise called as intrinsic value True indicator of the performance of the fund. If Nav> face value->the fund is appreciated NAV=Total funds in a scheme/no of units Eg:If the scheme size is 100crores,value of one unit is Rs.10,current market value of the scheme is 200 crors,then NAV(now)=200/100*value of one unit i.e RS.20

History of MF : 

History of MF Introduced by Foreign & colonial Government Trust of London in 1968. Large no of closed ended funds were formed in U.S in 1930,after that it was followed by other countries In India,it was started in 1980,though it began in the year 1964 with UTI launching its first fund

Classification of MF : 

Classification of MF On the basis of Operation -> Open ended closed ended Interval funds On the basis of Geographical-> Offshore MF Domestic MF On the basis of Structure Capital Market Money market

On the basis of portfolio- : 

On the basis of portfolio- Growth Income Balanced Bond funds Stock funds Index funds Industry funds Tax relief funds Real estate funds Money market funds Asset management funds Liquid funds

Benefits of MF : 

Benefits of MF Professional Management Diversifications Convenience Return potential Low costs Liquidity Transparency Flexibility

Benefits of MF(contd..) : 

Benefits of MF(contd..) Choice of schemes Tax benefits Governemnt regulation Shareholders services Safety from loss due to unethical practices Product structure

CONCEPT OF MF : 

CONCEPT OF MF

Organisation of the fund : 

Organisation of the fund Sponsor->The company which sets that MF is called sponsor. Trustees->Safeguarding the interest of investors.They monitor the operations of various schemes they can even dismiss the AMC with the approval of SEBI AMC Success of mF depends upon the performance of AMC. Manages the funds of various schemes. They submits quarterly report on the functioning of MF to the trustees who will guide & control the AMC

How to choose a MF? : 

How to choose a MF? Investment objective->Regular income,pure growth orientd,balanced fund,tax saving etc Past performance Equity research Global linkages(Fund manager’s expertise in global markets) Transparency in fund accounting(should disclose NAV periodically & fact sheet) Investor services

How to judge the efficiency of MF : 

How to judge the efficiency of MF Stability Liquidity Growth Credibility of the issuer Returns Management approach

AMFI : 

AMFI Association of Mutual Funds in India (AMFI) incorporated in Aug 1995 is the Umbrella body of all the mutual fund registered with SEBI. It is non profit organization committed to developed the Indian mutual fund industry on professional, healthy & ethical lines & to enhance and maintain standards in all areas with a view to protecting & promoting the interests of Mutual Funds and their unit holders. AMFI is an industry association,not an SRO, so it can just issue guidelines to members. It cannot enforce regulations.

AMFI : 

AMFI Objectives of AMFI :-   To promote the interests of mutual funds and unit holders.   To set ethical, commercial and professional standards in the industry.   To increase public awareness of the mutual fund industry. AMFI is governed by a board of directors elected from mutual  funds and is headed by a full time chairman. AMFI has therefore prepared guidelines for intermediaries called AMFI Guidelines & Norms for Intermediaries (AGNI). Chairman-Mr.P.Kurian

SEBI regulations on mF : 

SEBI regulations on mF Should be managed by AMC Money markets schemes regulated by RBI & capital markets schemes regulated by SEBI 50% of Board of directors must be independent directors (no connection with sponsoring company) Directors should have atleast 10years of experience in financial services industry Minimum AMC networth should be RS.10 crores SEBI has the power to withdraw the powers of AMC if they fail to keep the interest of investors An AMC can not act as a AMC for other MF

SEBI(contd..) : 

SEBI(contd..) AMCs are allowed to do other business such as management services to offshore funds,venture capital funds & Insurance companies Minimum amount to be raised with open ended scheme Rs.50 crores & closed ended scheme Rs.20 crores Each scheme should be registered with SEBI before floating in the market Initial issue expenses should not exceed 6% of the funds raised For violating laws SEBI can impose penalty

SEBI(contd..) : 

SEBI(contd..) If the minimum amount or 60% of the target amount is not raised ,the entire subscription should be cancelled &money should be returned to the investor