Download - Mutual Funds
Mutual Funds Module
Padmavati Wealth Advisors
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Executive Summary
Padmavati Wealth Advisors
Concept – Mutual Fund What is Mutual Fund ? Types of Mutual Fund Benefits Drawbacks What is NAV ?
Equity As an Asset Class Why to stay invested for a Long-Term ?
Systematic Investment Plan (SIP) Power of Compounding Rupee cost Averaging
Tax Aspects Past Performance
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What is Mutual Fund?
Padmavati Wealth Advisors
Investor
InvestmentAdvisor
Fund ManagerInvestment
Returns/Income
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Types of Mutual Funds
Padmavati Wealth Advisors
Mutual Funds
By Structure
Open Ended
Close Ended
By Investment Objective
Equity
Balance
Income
Debt
Other Schemes
ELSS
Index Funds
Sector/Theme Specific
ETFs
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Why Mutual Funds ?
Padmavati Wealth Advisors
Diversification
No Entry Load
Tax Benefit
Professional Management
Affordability
Transparency
Regulations
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De-merits : Mutual Funds
Padmavati Wealth Advisors
Exit load No control over costs No tailor-made portfolio No assured Returns Management Risk
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Net Assets Value (NAV)
Padmavati Wealth Advisors
The net asset value of the fund is the cumulative market value of the assets fund net of its liabilities
Market Value of All Securities Held by Fund + Cash
and Equivalent Holdings - Fund Liabilities & Outstanding Exp
Total Fund Units Outstanding
A fund's NAV will change daily as the value of a fund's securities, cash held, liabilities, and the number of shares outstanding fluctuate.
NAV =
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Risk Return Profile
Padmavati Wealth Advisors
Money Market Funds
Debt Funds
Income Funds
Balanced Funds
Equity Funds
Risk
Return
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Long Term really matters!!
Padmavati Wealth Advisors
0
5000
10000
15000
20000
25000
Ap
r-7
9
De
c-8
0
No
v-8
2
Au
g-8
4
Ma
y-8
6
Jan
-88
Se
p-8
9
Jun
-91
Ma
r-9
3
Se
p-9
4
Ma
r-9
6
Se
p-9
7
Fe
b-9
9
Jul-
00
De
c-0
1
Ma
y-0
3
Se
p-0
4
Fe
b-0
6
Jul-
07
First Major Bull Market
22% one-day decline in US, no linkage then
Harshad Mehta Scam
Asian Crisis; Unaffected
Tech bull market & bust
Start of five-year bull market
All time high & correction begins
BS
E S
en
siti
ve In
dex
Deep corrections do not matter for long-term investors
Figures as of July 2008; Data Source: Bloomberg; Analysis: In house
Annual returns 17.6% for equity index
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Volatility of returns reduces over time
Padmavati Wealth Advisors
3 years 5 years 10 years 15 years 20 years-30
-15
0
15
30
45
60
75
90
High 81.7 53.0 34.7 27.8 21.1
Low -15.5 -7.0 -2.1 7.7 13.7
Average
19.9 18.5 17.2 17.2 16.9
Height of each bar shows the range of returns. Smaller the range shown by the bar, the better for investors
Longer the time frame, the greater is the reduction in risk without an impact on returns
Effective Annual Returns %
Source: Bloomberg; Analysis: as of July 31, 2008
Retu
rns
%
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Padmavati Wealth Advisors
Systematic Investment Plan (SIP)
SIP is an investment program that allows you to contribute a fixed amount (as low as Rs.1000) in mutual funds at regular intervals.
SIP allows you to combine - Convenience Rupee Cost Averaging Flexibility Power of Compounding Investment experts the world over advocate Systematic Investment Plan (SIP) Instills the much needed investment discipline
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Power of Compounding!!!
Padmavati Wealth Advisors
Albert Einstein called “The most powerful force in the universe is compound interest“ because of its amazing abilities. Essentially, compounding is the idea that you can make money on the money you’ve already earned.
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Power of Compounding (An Example)
Padmavati Wealth Advisors
25 30 35 40 45 50 55 60
25 year old Preeti invests Rs.10000 annually for 10 years and stops. She does not withdraw any money.
Rohit begins investingat 35 a similar amountof Rs.10000 annually. He invests for the next25 years and he too does not withdraw any money.
24.6 lacs
76.9 lacs
P.S : 1) Assumed Rate of Return: 13% CAGR 2) Its doesn’t give any guarantee of future returns
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Rupee Cost Averaging
Padmavati Wealth Advisors
Technique of buying a fixed rupee amount of a particular investment at regular intervals, regardless of the NAV
Month Amount NAV Units
1 1,000 10.00 100.00
2 1,000 9.40 106.38
3 1,000 10.60 94.34
Total 3,000 9.98 300.72
Average Cost of
Purchase
Start early to reap maximum benefits
Padmavati Wealth Advisors
15
25 years 30 years 35 years 40 years 45 years 50 years
155.4
71.6
32.5
14.35.8 1.8
Rs 1000 a-month investment till age 55 Portfolio value reckoned at age 60Asset Allocation: Equity 70% and Fixed Income 30%Returns based on historical average. In the equity, based on the Sensex and in the Fixed income, based on the government bond yieldReturns assumed 15.3%
From age 25, Rs 1000-a-month could deliver Rs 1.55 crore at age 60
Value in Rs lacs
Starting age of investing
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Tax Treatment : Equity Funds
Padmavati Wealth Advisors
Long Term Capital Gain(More than 1 Yr)
• Tax Free
Short Term Capital Gain(Less than 1 Yr)
• 15%Flat+10%SC+3%Edu.Cess• i.e. 16.995%
Dividends
• Tax Free
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Past Performance of Equity Schemes
Padmavati Wealth Advisors
Name of the Fund 3yrs CAGR
5yrs CAGR
IDFC Premier Equity Plan A (Diversified Equity Fund) 26.65%
22.70%
(4yrs)
Reliance Regular Savings Equity (Diversified Equity Fund)
21.06%
22.95%
(4yrs)
DSP Black Rock Equity (Diversified Equity Fund) 18.97%
33.91%
Reliance Diversified Power Sector Fund (Sectoral Fund)
36.30%
46.21%
Sundaram BNP Paribus Tax Saver (ELSS) 19.09%
33.04%
Source: Value Research, as on Dt 9th sept 2009
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Back Testing Results
Padmavati Wealth AdvisorsFigures as of July 2008; Data Source: Bloomberg;
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Rich Dad V/S Poor Dad
Padmavati Wealth Advisors
Income Expense
Salary/ProfitsInterest EarnedDividendsIncome from invst.Rent IncomeConsultancy Fees
House Hold Exp.
Income Statement
Liabilities
Assets
HouseReal EstateEquity SharesFixed DepositsGovt. Bonds
Balance Sheet
Income Expense
SalaryHouse Rent/EMIsCar EMIsInterest on LoanHouse Hold Exp.
Income Statement
Balance Sheet
Liabilities
Assets
Home LoanCar LoanPersonal LoanLoans From Relatives/Friends
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How Qualified Advisor can Make a Difference?
Padmavati Wealth Advisors
Worst performing
Funds
Best Performing
Funds
Source: Value Research 3 Yrs CAGR Returns
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Padmavati Wealth Advisors
Mutual fund investments are subject to market risks. Please read the offer document carefully before taking an investment decision.
Risk Factors: All mutual funds and securities investments are subject to market risks, and there can be no assurance or guarantee that fund's objectives will be achieved. NAV may go up or down, depending on the factors and forces affecting the securities market. There is uncertainty of dividend distribution and risk of capital loss
Disclaimer
Happy Investing!!
Padmavati Wealth AdvisorsKunal Doshi+91 98334 67999 | O. 91-22-28081677 [email protected]