basics of mutual fund final
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Basics of Mutual Fund
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Flow of Presentation :
What is Mutual Fund?
Structure of Mutual Fund
Parties to Mutual Fund
Advantages of Mutual Fund
Disadvantages of Mutual Fund
NAV
Types of Fund
SIP
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What is Mutual Fund?
Regulatory Body :
A mutual fund is a company that pools money taken from many investors& invests the money in stock, bonds & other securities.
The returns earned through these investments are shared by its investor
in ratio to the units owned.
India SEBI UK FSA
US - SEC
AUM Asset under Management :The total value of all the investments which are currently being managed
by the fund. Depending upon the market conditions, it keeps on
changing.
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Parties to Mutual Fund :
Sponsors
Trust/Board of Trustees
AMC Asset Mgmt Company
Fund Manager
Investor
Transfer Agent
Regulatory Body
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Disadvantages of Mutual Fund :
High Cost
Dependent on Fund Manager
Less predictable income
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What is NAV, how is it calculated?
Net Asset Value is the market value of the assets of the scheme minus
its liabilities. The per unit NAV is the net asset value of the scheme
divided by the number of units outstanding on the Valuation Date.
Total Assets Total Liabilities
Net Asset Value = ----------------------------------------
Number of Outstanding Shares
NAV = (Market Value of All Securities Held by Fund + Cash and Equivalent
Holdings Fund Liabilities) / Total Fund shares Outstanding
Let's assume at the close of trading yesterday that a particular mutual
fund held Rs.10,50,000 worth of securities, Rs. 2,00,000 of cash, and
Rs. 5,00,000 of liabilities. If the fund had 1,00,000 shares outstanding,
then yesterday's NAV would be:
NAV = (10,50,000 + 2,00,000 5,00,000) / 1,00,000 = 7.5 Rs.
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Types of Funds :Money Market Funds: Invest in short-term (less than one year to maturity) corporateand government debt securities such as treasury bills, bankers acceptances and
corporate notes.Debt Funds : Debt funds are those funds that invest a huge portion in debt papersissued by Government Authorities, Private Companies, Banks & Financial Institution.
These funds carry low risk & provide stable income to the investors.
Fixed Income Funds: Invest in debt securities like bonds, debentures and mortgages
that pay regular interest, or in corporate preferred shares that pay regular dividends.The goal, typically, is to provide investors with a regular income stream with low risk.
Growth or Equity Funds: Invest primarily in common shares (equities), but may holdother assets as well. The goal is typically long-term growth because the value of the
assets held increases over time. Some growth funds focus on large blue-chip
companies, while others invest in smaller or riskier companies.
Specialty Funds: May invest primarily in a specific geographical area (e.g., Asia) or a
specific industry (e.g., high technology companies). Index Funds: Invest in a portfolio ofsecurities selected to represent a specified target.
Balanced Funds:Invest in a balanced portfolio of equities, debt securities and moneymarket instruments with the objective of providing reasonable returns with low to
moderate risk
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SIP Systematic Investment PlanIt is a method of investing in Mutual Fund. A Systematic Investment Plan is a
periodic investment in Mutual Fund.
Date NAVApprox units you
will get at Rs.1000
Jan 1 10 100
Feb 1 10.5 95.23
Mar 1 11 90.90Apr 1 9.5 105.26
May 1 9 111.11
Jun 1 11.5 86.95
Within six months, you would have 5,89.45 units by investing just 1,000 everymonth.
If the NAV for this particular fund is Rs.11 on Jul 1 then the value of fund
would be,
Total Investment = 1000 * 6 months = 6000 Rs.
Total Units owned = 589.45 (as mentioned above)As on Jul = 589.45 * 11 = 6483.95 Rs.
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