mutual funds
Post on 15-Jul-2015
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THE STUDY OF MUTUAL FUNDS
IN INDIA
Presented to: Presented by:
Prof. Prachi Anand Abhinandan Jain Bm-014006
Aman Chawla Bm-014024
Amir Ali Bm-014025
Amit Yadav Bm-014027
Anupam Shiva Bm-014044
Rights reserved
INTRODUCTION
• Mutual fund is a investment fund that pools money from many investors to
purchase securities.
• Pool of money provided by individual investors, companies, and other
organisation.
• A fund manager is hired to invest the cash the investors have contributed.
• The goal of manager depends upon the type of fund, for e.g fixed income
fund manager would strive to provide highest yield at lower risk.
REGULATION
• Governed by SEBI (Mutual funds) Regulation, 1996
All mutual funds registered with it, constituted as trust(under indian trusts act,1882)
• Bank operated MF's supervised by RBI too.
• SEBI- very detailed guidelines for disclosures in offer document, offer period,
investment guideline, etc
• NAV to be declared everyday for open-ended and every week for close ended
• Disclose on website, newspapers.
•
TYPES OF MUTUAL FUNDS
• By structure
• Open- ended- anytime enter/exit
1. close-ended- listed on exchange, redemption after period of scheme is over.
• By investment objective
• Equity- only in stocks-long term(3 years)
1. Debt- only in fixed income securities
2. Liquid / money market- short term money market
3. Balanced/hybrid- stocks+ fixed income securities
1. Other schemes
2. Tax saving scheme such as ELSS.
3. Special scheme (ETF, foreign funds)
HOW TO SELECT FUND THAT IS RIGHT FOR YOU
• Invest in only blue chip companies or in start-up businesses or in specific sectors.
• Must consider fund ranking which are released by Morning star or Standard & poor,
especially if fund manager has recently changed
• Past sucess is no indication of future.
• If you don't have brokerage account then visit companies website offering mutual fund
investment, most funds have minimum initial inveatment of Rs.500/.
• Mutual funds are constantly monitored by fund manager and he can devate more time in
analysing financial statements or calculating financial ratios than an individual
investor.
INVESTING CHECKLIST
• Draw up your asset allocation
1. Financial goal & time frame(Are you investing for retirement?, for children's
education?,or for current income?)
2. Risk taking capacity
• Identify funds that fall in your buy list
• Obtain and read the offer documents.
• Match your objectives
1. In terms of eqity share , downside risk protection, tax benefit offered, dividend
payout policy.
• Check your past performance.
• performance of various funds with similar objectives for atlest 3-5 years(managed
well&provide consistent results)
CHECKLIST CONTD..
• Think hard about investing in sector funds
1. For reletively agrresive investors.
2. Close touch with developments in sector, review portfolio regularly
3.
• Look for loads costs
1. management fees, annual expenses of fund and sales loads.
• Does the fund change fund manager often?
• Look for size and credentials
1. Asset size less than Rs. 25 crore
• Invest regularly, choose the S-I-P
• Mutuall fund - an integral part of your savings and wealth building plans.
TRACKING MUTUAL FUNDS
• Filling up an apllication form and writing out a cheque = end of story...NO!
• Periodically evaluate performance of your funds
1. Fact sheets and newsletters
2. website such as www.valueresearchonline.com, www.mutualfundsindia.com,
3. www.morningstar.in, www.lipperweb.com
• Newspapers
•
• Professional advisor
WARNING SIGNALS
• Fund's management changes.
• Performance slips compared to similar funds.
• Fund's expense ratio climb.
• Beta , a technical measurfe of risk, also climbs.
• Independent rating services reduce their ratings of the fund.
• It emerges into another fund.
• Change in management style or a change in the objective of the fund.
MUTUAL FUND COMPARISON
• Absolute returns
• - % difference of NAV
- Diversified equity with sector funds- NO
• Benchmark returns
• - SEBI directs
- Funds returns comparedto its benchmark
• Time period
• - Equal to time for whichyou plan to invest
- Equity - compare for 5 years, debt for 6 months.
• Market conditions
• - proved its mettle in bear market
What mutual funds are not?
• MFs are not 'get rich quick investments'
• MF's are not ' risk free investment'
• MF's are not ' assured return investments'
• MF's are not ' a universal solution to all investment needs'
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