Mutual Fund

What do you do with your

money?

2
3
What's wrong with just
saving?

Inflation eats up your savings over

time !!!

4
What does inflation do to your
expenses?
Impact of
Inflation

80,000
₹
60,000
₹
40,000
30,000

₹
₹

Toda 5 15 20
y Years Years Years

Impact of 5% yearly inflation on

expenses
5
What does inflation do to your
savings?

1,00,000

80,000
₹

50,000

35,000
₹

₹
Toda 5 15 20
y Years Years Years

Impact of 5% yearly inflation on

Savings
6
Solution?
Investing - the safeguard against
inflation

• Start Saving … earlier you start the better

• Progress from a Saving to Investing

• Put money to work rather than accumulating or

keeping it idle

• You work hard to earn money …

So, make the

money work hard for you

• Benefit from the Power of Compounding

7
8
DETERMINE WHAT ARE YOU INVESTING FOR?
Goal based investing

9
What are the various
options?

MUTUAL
FUNDS
GOLD
PROPERTY

STOCKS
INSURANCE

BANK BONDS
DEPOSITS

10
Make your investments work for
you

Fight INFLATION for you

Provide INCOME when you need it

Be ACCESSIBLE and USABLE in parts and

portions GROW in value and appreciate over

time

Proper Be REALISABLE at fair value and low cost

Asset Allocation is the answer
11
What is Asset
Allocation ?

Asset Allocation is like a balanced thali …

12
Asset Allocation should match your
needs
Investments that Investments that
Grow in Value Generate Income

Property Bonds

Gold NSC/KVP

Art Collection PPF

Equity Shares Bank / Company Deposits

Mutual Funds Mutual Funds

Are you investing in the right assets?

13
Mutual
Funds

14
 What is a Mutual
Fund?

• A mutual fund is the trust that pools the savings of a number of investors
who share a common financial goal.
• Anybody with an investible surplus of as little as a few hundred rupees
• can invest in Mutual Funds.
• Money collected is invested by a professional fund manager in different
types of securities.
• Securities could range from shares to debenture, from
Government Bond to
• money market instruments, depending upon the scheme’s stated objective.

• Mutual Fund investment 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 offers15
How does a Mutual Fund
work?

Pool
their
Delivered money
to
INVESTORS

RETURNS FUND MANAGER

Invest
Helps in
generate
STOCKS / SECURITIES

16
Why invest in Mutual
Funds?

Professional
Management

Low Cost Transparency

RISK
DIVERSIFICATION

Convenient
(Invest Small Liquidity
Amounts)
Well-
Regulated
bySEBI

17
Mutual Fund Structure
&
Scheme Categories
18
 Structure of Mutual Fund at a glance
…

Execute a Trust Deed

Sponsors to form a trust Trustee
s

Mutual Fund is established as a Trust under Indian Trust

Act, 1882
Investment Asset
Mutual Fund Management
Investor & Day-to-day
Management
s Operations Company

Custodian

Registrar &
Agents/ Fund
Bankers Transfer
Distributor Accountants
Agency
s
19
 Types of Mutual
Funds

Organisation Manageme Investme Investme Other

al nt of nt nt Fund
Structure Portfolio Objectiv Portfolio Types
e Exchange
Open Equit
Growt Traded
y Funds (ETF)
Activ h
Ende Fund Gold
e Funds ETF
d s
Fund Debt
Funds
Close s Fund ELSS
Incom s
e Retirement /
Ende Hybri
Funds Pension
d d Scheme
Funds Passiv Fund Overseas
Interv e Hybri sLiqui Funds

al Funds d
d Fund of
Funds Fund Funds
Fund
s
s

20
 Categorization of Mutual Fund
Schemes
As per SEBI guidelines on Categorization and Rationalization of schemes
issued in October 2017, mutual fund schemes are classified as –
1. Equity Schemes
2. Debt Schemes
3. Hybrid Schemes
4. Solution Oriented Schemes – For Retirement and Children
5. Other Schemes – Index Funds & ETFs and Fund of Funds

• Under Equity category, Large, Mid and Small cap stocks have now been
defined.

• Naming convention of the schemes, especially debt schemes, as per

the risk level of underlying portfolio (e.g., Credit Opportunity Fund is
now called Credit Risk Fund)

• Balanced / Hybrid funds are further categorised into conservative 21

hybrid fund, balanced hybrid fund and aggressive hybrid fund etc.
Equity
schemes

22
Equity
Funds

Invests in equities and

equity
related instruments of
companies

Seeking long term growth,

but volatile in the short term

Suitable for investors with

higher risk appetite and
longer investment horizon

23
Equity Funds
Categories

• At least 65% investment in equity &

Multi Cap Fund* equity related instruments

Large Cap Fund • At least 80% investment in large cap

stocks

• At least 35% investment in large cap

Large & Mid Cap stocks and 35% in mid cap stocks
Fund
Mid Cap Fund • At least 65% investment in mid cap stocks

Small cap Fund • At least 65% investment in small cap

stocks

* Also referred to as Diversified Equity Funds

24
Equity
Funds

Dividend Yield Predominantly invest in dividend yielding stocks,

Fund with at least 65% in stocks

Value Fund Value investment strategy, with at least 65% in

stocks
Scheme follows contrarian investment strategy
Contra Fund with at
least 65% in stocks
Focused on the number of stocks (maximum 30)
Focused Fund with at
least 65% in equity & equity related
instruments
Sectoral/ At least 80% investment in stocks of a
Thematic Fund particular sector/ theme
At least 80% in stocks in accordance with
ELSS Equity Linked Saving Scheme, 2005, notified 25
by Ministry of
Equity Linked Savings Scheme
(ELSS)

Deductionfrom taxableincome
of upto Rs. 1,50,000 under Sec
80C

Invests predominantly in
equity

Shortest lock-in period of 3

years as compared to other tax
saving options

26
Debt
schemes

27
Debt
Funds

Invest in differenttypes of
fixed income securities

Aims to earn interestincome

and capital appreciation

Suitable for investors

seeking
income at moderate risk

28
 Debt Funds
Categories
Overnight Fund • Overnight securities having maturity of 1 day
• Debt and money market securities with
Liquid Fund maturity
of u pto 91 days only

• Debt & Money Market instruments with

Ultra Short Duration Macaulay duration of the portfolio
between 3 months - 6 months
Fund
• Investment in Debt & Money Market
Low Duration Fund instruments with Macaulay duration portfolio
between 6 months- 12 months

• Investment in Money Market

Money Market Fund instruments having maturity upto 1
Year
• Investment in Debt & Money Market
instruments with Macaulay duration of the
Short Duration Fund portfolio between 1 year - 3 years
29
 Debt
Funds

• Investment in Debt & Money Market instruments with

Medium
Macaulay
Duration Fund duration of portfolio between 3 years - 4 years

Medium to Long • Investment in Debt & Money Market instruments with

Macaulay
Duration Fund duration of the portfolio between 4 - 7 years
• Investment in Debt & Money Market Instruments with
Long
Macaulay
Duration duration of the portfolio greater than 7 years
Fund
Dynamic Bond • Investment across duration

Corporate Bond • Minimum 80% investment in corporate bonds only in

AA+ and above rated corporate bonds
Fund
Credit Risk Fund • Minimum 65% investment in corporate bonds, only in
AA and below rated corporate bonds

30
 Debt
Funds

• Minimum 80% in Debt instruments of banks,

Public Sector Undertakings, Public Financial
Banking and PSU
Institutions and Municipal Bonds
Fund

Gilt Fund • Minimum 80% in G-secs, across maturity

Gilt Fund with 10 • Minimum 80% in G-secs, such that the

year constant Macaulay duration of the portfolio is equal
Duration to 10 years
• Minimum 65% in floating rate instruments
(including fixed
Floater Fund
rate instruments converted to floating
rate exposures using swaps/ derivatives)

31
Hybrid
schemes

32
Hybrid
Funds

Invest in a mix of equities and

debt

Gain from a healthy dose of

equities but the debt portion
fortifies them against any
downturn

Ideal for investors who are

looking for a mixture of safety,
income and modest capital
appreciation
33
 Hybrid
Funds
SEBI has classified Hybrid funds into 7 sub-categories as
follows:
Conservative Hybrid • 10% to 25% investment in equity & equity related instruments;
Fund and
• 75% to 90% in Debt instruments
Balanced Hybrid • 40% to 60% investment in equity & equity related instruments;
Fund and
• 40% to 60% in Debt instruments
Aggressive Hybrid • 65% to 80% investment in equity & equity related instruments;
Fund and
• 20% to 35% in Debt instruments
Dynamic • Investment in equity/ debt that is managed dynamically (0% to
Asset 100% in
Allocation or equity & equity related instruments; and
• 0% to 100% in Debt instruments)
Balanced
Advantage
Multi Asset • Investment in at least 3 asset classes with a minimum
Allocation allocation of
at least 10% in each asset class
Arbitrage Fund • Scheme following arbitrage strategy, with minimum 65%
investment in
equity & equity related instruments
34
Equity Savings • Equity and equity related instruments (min.65%);
Solution-
oriented &
Other schemes
35
Solution Oriented & Other
Schemes

• Lock-in for at least 5 or till

Retirement Funds
years retirement
age whichever is earlier
• Lock-in for at least 5 years or till the child
Children’s Funds
attains
age of majority whichever is earlier
• Minimum 95% investment in
Index Funds/ ETFs securities of a particular index

Fund of Funds • Minimum 95% in the

(Overseas/ investment underlying
Domestic) fund

36
Index
Funds

Portfolio replicates the

index

Aims to provide returns

in line with index

Suitable for investors

seeking returns similar to index

37
 Index
Funds
• Index funds create a portfolio that mirrors a market index
• The securities included in the portfolio and their weights are
the same as that in the index
• The fund manager does not rebalance the portfolio based on
their view of the market or sector
• The fund offers the same return and risk represented by the
index it
tracks
• The fees that an index fund can charge is capped at 1.5%

• Investors have the comfort of knowing the stocks that

will form
part of the portfolio, since the composition of the index is
known.
38
 Exchange Traded Funds
(ETFs)
• An ETF is a marketable security that tracks an index, a
commodity, bonds, or a basket of assets like an index fund.

• Unlike regular mutual funds, an ETF trades like a common stock

on a stock exchange. The traded price of an ETF changes
throughout the day like any other stock, as it is bought and sold
on the stock exchange.

• ETFs are passively managed, which means that the fund

manager makes
only minor, periodic adjustments to keep the fund in line with its
index.

• Rather than investing in an ‘active’ fund managed by a fund

manager, when you buy units of an ETF you're harnessing the
power of the market itself.

• Because an ETF tracks an index without trying to outperform it, it

incurs lower administrative costs than actively managed 39
 Gold Exchange Traded
Funds
• Gold ETF is a open ended scheme which invest pure physical gold
bullion of 99.5 per cent purity. The scheme may also invest
gold related instruments approved by SEBI and Gold Deposit
Scheme of banks up to 20% of net assets
• Gold ETFs issue units against gold held in the portfolio. Each
unit represents a defined weight in gold, typically one gram.
• The price of Gold ETF unit moves in line with the domestic price
of gold.
• Gold ETF are benchmarked against the price of gold.
• Gold ETFs are considered as non-equity mutual funds for the
purpose of
taxation.
⁻ Eligible for long-term capital gains benefits if held for 3
years
40
⁻ No wealth tax is applicable on Units of Gold ETFs
 International
Funds
• International funds enable investments in markets outside
India, by holding in their portfolio one or more of the
following:
– Equity of companies listed abroad.

– ADRs and GDRs of Indian companies.

– Debt of companies listed abroad.

– ETFs of other countries.

– Units of passive index funds in other countries.

– Units of actively managed mutual funds in other

countries.
• International equity funds may also hold some of their
portfolios in Indian equity or debt.
– They can hold some portion of the portfolio in money 41
 Fund of Funds (FoF)
• Fund of funds are mutual fund schemes that invest in
the units of other schemes of the same mutual fund or
other mutual funds (Hence FoF is also known as multi-
manager fund).
• Its portfolio contains Units of different underlying mutual
fund
scheme in which the FoF has invested.
• The FoF will have two levels of expenses –
a) that of the scheme whose units the FoF invests in and
b) the expense of the FoF itself
– SEBI Mutual Funds Regulations have capped the total
expenses that can be charged across both levels

• FoF provide benefit of risk diversification and

portfolio diversification with small amounts of 42

investment.
 Arbitrage
Funds
• “Arbitrage” is the simultaneous purchase and sale of an asset to
take advantage of the price differential in the two markets and
profit from price difference of the asset on different markets or
in different forms.
• Arbitrage fund buys a stock in the cash market and simultaneously
sells it in the Futures market at a higher price to generate returns
from the difference in the price of the security in the two markets.
The fund takes equal but opposite positions in both the markets,
thereby locking in the difference.

The positions have to be held until expiry of the derivative cycle

and both positions need to be closed at the same price to
realize the difference.
• The cash market price converges with the futures market price at
the end of the contract period. Thus it delivers risk-free profit for
the investor/trader.
• Price movements do not affect initial price differential because the
profit in one market is set-off by the loss in the other market. 43
Mutual Fund Scheme - Which one to
buy?

…. a matter of Risk Return Trade-Off

Risk Return Type of Scheme

Higher Risk Higher Returns Equity Schemes

Moderate Risk Moderate Returns Hybrid Schemes

Low - Moderate Risk Low - Moderate Debt Schemes

Returns
Very Low Risk Lower Returns Liquids Schemes

44
 Risk / Return Hierarchy

Debt Debt-oriented Equity Sectoral

Hybrid Funds
Mid Cap
>>Return<<

>>Return<<
Gilt & Bond
Funds
Funds
Diversified
Short Term Funds
Funds Large Cap
Ultra Short Term Funds
Equity-oriented
Funds Liquid Funds Hybrid
Overnight Funds Equity Savings
Funds

Low Med High Low Med High

>>Risk<< >>Risk<<

45
Scheme
Related
Document
s 46
 Scheme Related
Documents
• Scheme information document (SID)
– SID contains information that is specific to a each MF scheme.
– Concise & detailed information that a prospective investor
should know so
as to take an informed decision to invest

• Statement of Additional Information(SAI)

– SAI contains information with regards to each mutual fund and is
common across all schemes of a mutual fund.

• Key Information Memorandum (KIM)

– Abridged version of SID
– Simple to understand and contains key / essential
information that investors need to be aware about before
they invest

One must read & understand scheme related documents

before investing in a mutual fund scheme.
47
 Factshee
t
• Fact sheets help you assess a
scheme and keep track of its
performance

• Issued every month

• Easy to understand and provides

a snapshot of the scheme

• Show following key information

at a glance:
– NAV
– Returns
– Fund Managers
managing the
portfolio
– Riskometer
– Other statistics allowing
investors to compare mutual
funds and decide which ones
to invest in.
48
Plans &
Options

49
 Direct Plans & Regular
Plans
• All MF schemes offer a Direct Plan and Regular Plan
for investments

• You can invest –

– DIRECTLY i.e., without involving or routing the investment
through
any distributor/agent in a ‘Direct Plan’ OR
– Through / with the help of a Mutual Fund agent/
distributor in a
Regular Plan

• Direct Plan has a separateNAV, which is higher than

the normal “Regular” Plan’s NAV.

• Direct Plan has lower expense ratio as there is

no
distributor/agent involved 50
 Growth Option & Dividend
Option
• Growth Option
– Capital appreciation in the investment are ploughed back in the
scheme and are reflected in increase in the NAV.
– Investors do not receive any periodic payments.
– Suitable for investors who do not require regular income.
– Tax efficient

• Dividend Option
– Capital appreciation in the investment are paid / distributed to the
investors by way of dividend, periodically.
– Dividend payment is subject to availability of distributable surplus
in the MF scheme.
– On dividend payment NAV of the scheme drops.
– Dividends are tax-free in the hands of investors but are subject
to levy of Dividend Distribution Tax (DDT).
– Suitable for investors who require income cash flow.
– Under Dividend Reinvestment sub-option, the dividend
proceeds are reinvested in the same scheme and additional
units are allotted. 51
Modes of
Investing

Lumpsum Investment – Initial +

Additional

Systematic Investment Plan (SIP)

Systematic Transfer Plan

(STP) Inter Scheme

Switches 52
 Systematic Investment Plan
(SIP)
• SIP is a method of investing a fixed sum, at a regular
interval, in a mutual fund scheme

• Similar to monthly saving schemes like a recurring

deposit

• Advantages
• Enables regular investments without any additional paperwork
• Convenient way to invest regularly through one time standing
instruction
• Convenience of small installments
• Rupee Cost Averaging Benefit to counter volatility - it brings
down the average cost of your Investments
• No timing the market! 53
SIP: The Power Of
Compounding

SIP of Rs. 1,000 invested per month @ 8% pa till the age of 60.
Starting Total Value
Age Amount Saved at the age of 60

25 4,20,000 23,09,175

30 3,60,000 15,00,295

35 3,00,000 9,57,367

40 2,40,000 5,92,947

…the sooner you start, makes a lot of difference!

54
SIP - How Rupee Cost Averaging
helps
Month Amount Rising Market Falling Market Volatile Market
NA Units NA Units NAV Units
V Allotted V Allotted Allotted
(Rs) (Rs) (Rs)
1 10,000 10 1000.00 10 1000.00 10 1000.00
2 10,000 10.5 952.38 9.75 1025.64 10.5 952.38
3 10,000 12 833.33 9 1111.11 9 1111.11
4 10,000 14 714.29 7 1428.57 11 909.09
5 10,000 17 588.24 6.5 1538.46 13 769.23
6 10,000 18 555.56 6 1666.67 11.5 869.57
Total 60,000 81.50 4643.79 48.25 7770.45 65.00 5611.38
Avg. Purchase NAV 13.58 8.04 10.83
Avg. cost per unit 12.92 7.72 10.69

Put aside an amount regularly Rupee cost averaging

Discipline is the key Control volatility

Note: The above example uses assumed figures and is for illustrative purposes only.
55
 Systematic Withdrawal Plan
(SWP)
• SWP is a facility which allows an investor to withdraw a
fixed amount from the investment in a MF scheme at pre-
determined interval, such as monthly or quarterly basis.

• Under SWP, units equivalent to the amount desired by

the investor are redeemed and the proceeds are credited
to the bank account of the investor on a pre-determined
date.

• SWP can be used a source of regular cash flow

especially for
post-retirement planning.

• SWP also helps in supplementing your regular salary, etc.

income by way of additional cash flow 56
HOW TO INVEST
IN
MUTUAL FUNDS
57
 Steps for Investing in Mutual
Funds
Pre-requisites
1. KYC (Know Your Customer) Process
2. PAN Card
3. Bank Account

Steps to complete KYC Process

Visit any MF Branch Investor Service Centre / Branch with
required KYC Documents, namely –
i. Address Proof  Aadhaar Card, Passport, Tel. bill etc.
ii. Identity Proof  PAN Card, Aadhaar Card, Passport, Voter’s
card etc.

Submit Completed KYC form with photograph with required

documents
After completing KYC, you can open a MF Folio with any Mutual
Fund 58
and start investing .
 Modes of Investing
📝Physical Mode✍🏻
(Traditional / Paper
based )

and

On-line
Mode 59
 How to invest in a Mutual Fund
Scheme?
• One can invest in a Mutual Fund scheme Offline or Online

• Offline (physical application) mode

– Duly completed scheme application form signed by all applicants
– Cheque or bank draft for the amount to be invested
– Submit the above at the branch office or designated Investor
Service Centres (ISC) of mutual funds or Registrar & Transfer Agents
& MFU

• Online mode
– Websites of the respective Mutual Funds
– Websites of Mutual Fund Distributors
– Buy mutual funds units through NSE – MFSS and BSE - StAR MF just
like a company stock
– MF Utilities (MFU) a technology based shared service platform for MF
transactions promoted by the mutual fund industry for participating
mutual funds.
60
 How to withdraw your
money?
• Withdrawing your money from Mutual Fund scheme is called as
Redemption or Repurchase
• You can withdraw full or partial amount or even a specific number of
units

• Offline mode to redeem your mutual fund investments

– Unit holder needs to submit a duly filled and signed Redemption
Request form
to the AMC's or the Registrar’s designated office
– All holders have to sign the Redemption form
– The proceeds from the redemption will be credited to the
registered bank
account of the first named unit holder

• Online mode to redeem your mutual fund investments

– Log-on to the ‘Online Transaction’ page of the desired Mutual Fund61
 Performance Evaluation
Principles
• A mutual fund provides relative return, respect to
with benchmark. its
– Returns have to always be seen in comparison with a fund’s
benchmark
– Appropriate benchmarks should be used to evaluate a fund’s
performance
• The return of a fund should be measured over a period of
time, representative of recommended holding period and
objectives of the fund
– Debt funds are held for shorter periods
– Equity funds are held for longer periods

• The returnof the fund has to be adjusted for the

risk it has
assumed to generate the return.
– Higher return with higher than proportionate risk, is
a case of underperformance, compared to a fund
with higher return at lower risk 62
 What is
NAV?
• The NAV (net asset value) is the market value of all the
funds investments less liabilities and expenses, divided
by outstanding number of units for the firm.

• NAV is important as it is the basis for valuing an investor’s

holding of units in a mutual fund, and the relative
appreciation of the same

• Mutual Fund NAVs are published daily on AMFI’s website,

Mutual Fund Websites, leading newspapers, etc.

63
 Product
Labelling

• Mutual funds are required to ‘Label’ their schemes on the following

parameters:
• Nature of scheme in an indicative time horizon
• (short/medium/long term)
• A brief about the investment objective (in a single line sentence)
followed by kind of product in which investor is investing
(Equity/Debt).
• Level of risk, depicted by ‘Riskometer’ as under:
– Low - principal at low risk
– Moderately Low - principal at moderately low risk
– Moderate - principal at moderate risk
– Moderately High -- principal at moderately high risk
– High - principal at high risk
• A disclaimer saying: “Investors should consult their financial advisers
if they are not clear about the suitability of the product.”

64
 Nominatio
n
• Facility that enables an individual unitholder (including
sole proprietor of sole proprietary concern) to nominate a
person, who can claim the Units held by the unitholder or
the redemption proceeds thereof in the event of death
the unitholder.
• If the Units are held jointly by more than one person, all
joint unit holders are required to together nominate a
person in whom all the rights in the units would vest in
the event of death of all the joint unit holders.
• Nomination can be made either at the time of initial
application for purchase of Units or subsequently.
• Nomination once made can be changed subsequently any
time and any number of times.

65
 Why is Nomination
important?
• In case nomination is not made by a Unitholder, the Units would
be transmitted to the account of legal heir(s), depending
whether the deceased person has left behind a Will and as per
applicable succession law, which involves lengthy (and
sometimes expensive & cumbersome) procedure.

• Nomination is a simpler and inexpensive way to make things

easy for one’s near and dear ones to claim the money in your
mutual fund folio, demat account or bank account
expeditiously, through minimal paper after one’s death.

• To claim the Units after the death of a unitholder, the nominee

has to complete the necessary formalities, such as completion
of KYC process, along with proof of death of the unit holder,
signature of the nominee duly attested, furnishing of proof of
guardianship in case the nominee is a minor, and such other
document as may be required for transmitting the units in
favour of the nominee(s).
66
 Complaints Redressal
Mechanism

Complaint to Mutual Fund

– Contact the Investor Relations Officer of the

Mutual Fund

– Name and contact details of the Investor

Relations Officer are available in the Scheme
Information Document and also on the
website of the concerned mutual fund.

67
SEBI Complaints Redress
System
SEBI has provided a centralized
web based complaints redress
system on its portal, named
'SCORES’.

If you are not satisfied with the

response from a particular
Mutual
Fund/company/intermediary, you
may then lodge an online
complaint with SEBI through
SCORES to get your complaint
redressed.

SEBI takes up the complaints

registered via SCORES with the
concerned company / mutual
fund / intermediary for timely
68

redressal.
Thank
You