MUTUAL FUNDS INDUSTRYMUTUAL FUNDS INDUSTRY

ININ

INDIAINDIA

Suman Jangir

Definition

• The pooled money that is invested in Assets.

‘‘OR ‘OR ‘

• Form of trust that pools the funds of a whole lot of investors to make more money by investing in an array of financial instruments.

HISTORY OF MUTUAL FUNDS

1964 - UTI

1987 – Public Sector Banks, Insurance Companies {SBI, Canbank, PNB LIC, GIC

1993 – Private Sector Kothari Pioneer (Later merged with Franklin Templeton), J P Morgan, Morgan Stanley, George Soros and Capital International

Concept of Mutual fundsConcept of Mutual funds

• A Mutual Fund 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 realized are shared by its unit holders in proportion to the number of units owned by them.

» Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in diversified professionally managed basket of securities at a relatively low cost.

Concept of Mutual fundsConcept of Mutual funds

ObjectivesObjectives

Money market Mutual Funds

Stock Mutual Funds

Bond Funds

Asset Allocation Funds

Types of fundsTypes of funds

Open- Ended FundsClose- Ended FundsUnit Investment Trust (UTI)Exchange Traded Fund (ETF) Real Estate Investment Trust (REIT)

Instant DiversificationLevel the playing field between professional and individual investorsShare administrative expensesLiquidityMinimal transaction costsConvenience

advantagesadvantages

Lower than Market Performance

Costs

disadvantagesdisadvantages

Services offered by mutual fundsServices offered by mutual funds

Automatic investments and withdrawal plansAutomatic re-investment of interest, dividends and capital gainsWiring and funds express optionsPhone or internet switchingCheck writingBook keeping and help with taxes

Buying A mutual fundBuying A mutual fund

STEP 1 – Determine risk preferences

STEP 2 – Determine asset allocation

STEP 3 – Identify family of funds that meet your objective

STEP 4 – Evaluate the funds