Download - Session 4 MF
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Various Third party products
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Learning Objectives
By the end of the session, you will be able to:
Brief History
Define Mutual Fund
Understand the organization of Mutual Fund
List advantages of Mutual Fund
Identify various types of Mutual Fund
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BRIEF HISTORY.The mutual fund industry in India started in 1963
with the formation of Unit Trust of India, at theinitiative of the Government of India and Reserve
Bank of India. The history of mutual funds in India
can be broadly divided into four distinct phases First Phase (1964-87): UTI
Second phase(1987-1993)- Entry of Public sector
funds: with entry of SBI mutual Fund
Third Phase(1993-2003) - Entry of Private Sector
Funds. The erstwhile Kothari Pioneer (now
merged with Franklin Templeton) was the first
private sector mutual fund
Fourth phase(since 2003):UTI was bifurcated into
UTI Mutual Fund and the Specified Undertaking of
the Unit Trust of India4
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CONCEPT
A MF is a trust that pools the savings of a number of
investors who share a common financial goal.
The money thus collected is then invested in capital
market instruments such as shares, debentures and
other securities.
The income earned through these investments and the
capital appreciation realised are shared by its unit
holders in proportion to the number of units owned by
them.
Thus a MF is the most suitable investment for thecommon man as it offers an opportunity to invest in a
diversified professionally managed basket of
securities at a relatively low cost.
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Introduction to Mutual Fund
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Introduction to Mutual Fund
A trust that
pools the savings of a number of investors who share a
common financial goal
And then invests in financial instruments to get returns
which is distributed back to investors
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Organisation of Mutual Fund
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Advantages of mutual fund
Professional Management
Diversification Return Potential
Low Costs
Liquidity
Transparency Flexibility
Choice of Schemes
Tax Benefits
Well Regulated
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TYPES OF MUTUAL FUNDS
Wide variety of MFs exist to cater to the needs
such as financial position, risk tolerance and
return expectation etc.,
The figurre in the next slide gives an overview
into the exsisting types of schemes in the
industry.
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Types of Mutual Fund
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Types of Mutual Funds
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OPEN ENDED FUNDS Open for investors to enter or
exit at any time eve after the New Fund Offer (NFO)
No time frame for closure of the scheme and there is
no upper limit or ceiling on the unit capital.
CLOSE ENDED FUNDS Has a fixed maturity and the
unit capital fund is also fixed. The investors can buy
the units only during the NFO and exit at the end of
the scheme period. However it is listed in the stock
exchange to maintain liquidity.
INTERVAL FUNDS
mostly for close ended funds. Atthe pre-specified period it becomes open ended for a
specified period only, during which period investors
can buy or sell the units during that period.
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TYPES OF MUTUAL FUNDS
OTHERS
-- Exchange traded Fund Some index funds
are listed on stock exchanges and so are
very liquid. Since this is a passive fund the
entry and exit load is very low.-- Fund of funds - A MF which invests in its
own other schemes or in the schemes of
other M.F. are called fund of funds.
-- Exchange traded gold funds
Funds
collected are invested in the gold and gold
derivatives. Being a passive fund, charges
are very low.
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Plans offered by Mutual Funds.
Growth Plan Number of units remain the same
only the units show capital appreciation.
Dividend plan Income is distributed periodically
Dividend Reinvestment plan Dividend is
reinvested thus number of units held will go up
unlike growth plan.
Systematic Investment Plan (SIP or AIP)
Systematic withdrawal plan (SWP or AWP)
Systematic Transfer Plan (STP or ATP)
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Summary
In this session we have learnt
About working of mutual fund
Benefits of mutual fund
Different types of mutual fund
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Next session
In the next session we will look at:
Risk Return Pattern of different types of mutual fund
Different terminologies of mutual fund
Who is the regulatory authority for mutual fund
Marketing concept of mutual fund
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