The Basics of a Mutual Fund
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This document provides an overview of mutual funds. It defines a mutual fund as a trust that pools savings from many investors who share a common financial goal. The money is invested in securities by fund managers. Mutual funds offer diversification and professional management. The main advantages are professional management, diversification, convenience, return potential, low costs, liquidity, transparency, flexibility, choice of schemes, and tax benefits. Investors can make money from capital appreciation as the fund's value increases, income from interest/dividends earned by the fund, and income distributions passed on to investors. The document outlines different types of mutual funds and strategies for investing like SIP, STP, and SWP.
The Basics of a Mutual Fund
- 1. Mutual Funds Presented by: Abhimanyu Mathur Jaya Lalwani Gourav Ku. Vishvakarma Pranshu Pasbola Rajat Jyot Singh Hora Shivani Shandilya
- 2. What is Mutual Fund and Why 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. The money thus collected is then invested by the fund manager in different types of securities. These could range from shares to debenture to money market instruments, depending upon the scheme’s stated objective. It 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. Mutual Fund is the most cost efficient distributors of financial products
- 3. How Mutual Fund works? A vehicle for investing in portfolio of stocks and bonds
- 4. Types of Mutual Funds
- 5. Advantages of Mutual Funds 1.Professional Management 2.Diversification 3.Convenient Administration 4.Return potential 5.Low cost 6.Liquidity 7.Transparency 8.Flexibility 9.Choice of schemes 10.Well regulated 11.Tax benefits
- 6. How do I make money from a mutual fund? 1. Capital appreciation: As the value of securities in the fund increases, the fund's unit price will also increase. You can make a profit by selling the units at a price higher than at which you bought 2. Coupon / Dividend Income: Fund will earn interest income from the bonds it holds or will have dividend income from the shares 3. Income Distribution: The fund passes on the profits it has earned in the form of dividends
- 7. Mutual Fund- How to invest in Mutual Funds Selection Process- 3 step process Step 1 Identify your investment needs 1. What are my investment objectives and needs? 2. How much risk am I willing to take? 3. What are my cash flow requirements? Step 2 Choose the right mutual fund. 1. The track record of performance over the last few years in relation to the appropriate Benchmark and similar funds in the same category 2. How well the mutual fund is organized to provide efficient, prompt and personalized service. 3. Degree of transparency as reflected in frequency an d quality of their communications. Step 3 Select the ideal mix of schemes Investing in just 1 scheme may not meet all your investment needs. You may consider investing in a combination of schemes to achieve your specific goals.
- 9. Mutual Fund- Which one to buy? Your Investment goal Capital Preservation Generate Income Capital Appreciation Based on your goals and risk tolerance Savings Bank Account Fixed Deposits Real Estate PPF Post office Monthly Income Scheme Gold Cash Funds Debt Funds Equity Funds Mutual Funds
- 10. Investment Strategies • SIP: Smart financial planning tool that helps you to create wealth, by investing small sums of money every month, over a period of time. Investing at an early stage of life lets you enjoy the benefits of two powerful strategies, rupee cost averaging and the power of compounding.
- 11. • STP: In STP we invest a lump sum amount in some Mutual Fund and then a fixed sum is transferred from that mutual fund to another mutual fund • SWP: A service offered by a mutual fund that provides a specific payout amount to the shareholder at predetermined intervals, generally monthly, quarterly, semiannually or annually.
- 12. Options • Growth: Dividend is not paid out under a growth option and the investor realizes only the capital appreciation on the investment as a result of an increase in NAV. • Dividend Pay out: Dividends are paid out to investors under this option. However, the NAV of the MFs falls to the extent of the Dividend Payout.
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