mutual funds basics
TRANSCRIPT
Mutual Funds BasicsLearn about Investment in Mutual Funds
Table of Contents
What are Mutual Funds
History of Mutual Funds in India
How Mutual Funds Work
Types of Mutual Funds
Mutual Funds Terminologies
Advantages of Investing in Mutual Funds
How to Invest in Mutual Funds
What are Mutual Funds?
• A Mutual Fund is a pool of money collected from investors by professional entities with an aim to invest in financial markets
• The amount collected is managed by the expert team on behalf of the unit-holders and then the profits or losses from the investment are distributed to the investors in proportion to their investments
• Investments in securities are spread across a wide cross-section of asset classes, industries and sectors and thus the risk is reduced
History of Mutual Funds in India
1963Establishment of Unit
Trust India
1964Unit Scheme 1964
launched
1987Entry of Public Sector
Mutual Funds
1993First Mutual Fund
Regulations came into being
1996Substitution of prevalent
rules by SEBI (Mutual Funds) Regulations 1996
2003UTI bifurcated into two
separate entities, Specified Undertaking of UTI and UTI Mutual Fund
How Mutual Funds Work
Investors
Fund Managers
Securities
Returns
Pool Money
Invest inGenerate
Passed onto
Types of Mutual Funds
Open Ended:In open-ended mutual funds, investors are permitted to enter and exit from the fund at any point of time at a price that is linked to the net asset value (NAV).
Closed Ended:In case of closed-ended funds, the total size of the corpus is limited by the size of the initial offer. Investors are restricted with enter and exit from the funds during ongoing periods.
Interval Funds:Interval funds combine the characteristics of both closed-end and open-ended funds. They are the scheme whose units can be bought and sold only during a specified time interval, which is predetermined by the fund house.
Categories of Mutual FundsMutual Funds
Equity Funds
Equity Diversified
Thematic Funds
Sector Funds
Index and ETFs
ELSS
Balanced Funds Debt Funds
Gilt Funds
Income Funds
Short Term Income
Liquid Funds
More on Types of Mutual Funds
Categories of Mutual Funds
Equity funds invest maximum of their assets (minimum of 65% to maximum of 100% of the assets) in shares of companies that are listed on the stock exchanges. Dividend and capital appreciation are the major revenue streams for equity funds. They are normally called as high risk high return products.
Balanced or Hybrid Funds invest in equities as well debt instruments. The key objective here is to blend advantages of equity and debt mutual funds – steady returns with moderate capital appreciation.
Debt oriented funds cater to more conservative investors as they invest all portion of their corpus in various debt instruments, such as company bonds and debentures, treasury bills, government securities, etc. The income of such funds comes from the interest that the debt instruments held in the portfolio deliver.
Mutual Funds Terminologies
AMCAn asset management company (AMC) is the fund house, which manages the pool of money.
Net Asset ValueThis is the price you pay to buy a mutual fund. The NAV of a mutual fund during the NFO period is Rs. 10. Then the NAV rises or falls based on various factors. NAVs are calculated at the close of the trading session everyday.
LoadThis is a fee paid by you when you buy or sell mutual fund units.
PortfolioThis is the corpus of a mutual fund, which is held in form of stocks, securities and cash depending upon the type of the fund.
New Fund OfferThis is similar to that of an IPO. Investors get to subscribe to the units of a new mutual fund scheme, usually at Rs. 10 per unit. If the mutual fund scheme is close-ended, it will not be available beyond this offer period.
Advantages of Investing in Mutual Funds
Investment Flexibility
Affordability and
Liquidity
Diversification
Transparency
Tax Benefits
Mutual Funds
More on Mutual Fund Investment
With HDFC securities, you can purchase mutual fund units online just like stocks through your trading account. The units will get credited to your demat account. You can even redeem the units (in demat form) online. The funds will get credited to your linked banked account on T+2 basis.
How to Invest in Mutual Funds
Invest in Mutual Funds Online with HDFC securities!
