Session 4 MF

7/28/2019 Session 4 MF

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Various Third party products


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Learning Objectives

By the end of the session, you will be able to:

Brief History

Define Mutual Fund

Understand the organization of Mutual Fund

List advantages of Mutual Fund

Identify various types of Mutual Fund

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BRIEF HISTORY.The mutual fund industry in India started in 1963

with the formation of Unit Trust of India, at theinitiative of the Government of India and Reserve

Bank of India. The history of mutual funds in India

can be broadly divided into four distinct phases First Phase (1964-87): UTI

Second phase(1987-1993)- Entry of Public sector

funds: with entry of SBI mutual Fund

Third Phase(1993-2003) - Entry of Private Sector

Funds. The erstwhile Kothari Pioneer (now

merged with Franklin Templeton) was the first

private sector mutual fund

Fourth phase(since 2003):UTI was bifurcated into

UTI Mutual Fund and the Specified Undertaking of

the Unit Trust of India4


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CONCEPT

A MF is a trust that pools the savings of a number of

investors who share a common financial goal.

The money thus collected is then invested in capital

market instruments such as shares, debentures and

other securities.

The income earned through these investments and the

capital appreciation realised are shared by its unit

holders in proportion to the number of units owned by

them.

Thus a MF is the most suitable investment for thecommon man as it offers an opportunity to invest in a

diversified professionally managed basket of

securities at a relatively low cost.

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Introduction to Mutual Fund

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Introduction to Mutual Fund

A trust that

pools the savings of a number of investors who share a

common financial goal

And then invests in financial instruments to get returns

which is distributed back to investors

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Organisation of Mutual Fund

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Advantages of mutual fund

Professional Management

Diversification Return Potential

Low Costs

Liquidity

Transparency Flexibility

Choice of Schemes

Tax Benefits

Well Regulated

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TYPES OF MUTUAL FUNDS

Wide variety of MFs exist to cater to the needs

such as financial position, risk tolerance and

return expectation etc.,

The figurre in the next slide gives an overview

into the exsisting types of schemes in the

industry.

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Types of Mutual Fund

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Types of Mutual Funds

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OPEN ENDED FUNDS Open for investors to enter or

exit at any time eve after the New Fund Offer (NFO)

No time frame for closure of the scheme and there is

no upper limit or ceiling on the unit capital.

CLOSE ENDED FUNDS Has a fixed maturity and the

unit capital fund is also fixed. The investors can buy

the units only during the NFO and exit at the end of

the scheme period. However it is listed in the stock

exchange to maintain liquidity.

INTERVAL FUNDS

mostly for close ended funds. Atthe pre-specified period it becomes open ended for a

specified period only, during which period investors

can buy or sell the units during that period.


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TYPES OF MUTUAL FUNDS

OTHERS

-- Exchange traded Fund Some index funds

are listed on stock exchanges and so are

very liquid. Since this is a passive fund the

entry and exit load is very low.-- Fund of funds - A MF which invests in its

own other schemes or in the schemes of

other M.F. are called fund of funds.

-- Exchange traded gold funds

Funds

collected are invested in the gold and gold

derivatives. Being a passive fund, charges

are very low.

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Plans offered by Mutual Funds.

Growth Plan Number of units remain the same

only the units show capital appreciation.

Dividend plan Income is distributed periodically

Dividend Reinvestment plan Dividend is

reinvested thus number of units held will go up

unlike growth plan.

Systematic Investment Plan (SIP or AIP)

Systematic withdrawal plan (SWP or AWP)

Systematic Transfer Plan (STP or ATP)

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Summary

In this session we have learnt

About working of mutual fund

Benefits of mutual fund

Different types of mutual fund

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Next session

In the next session we will look at:

Risk Return Pattern of different types of mutual fund

Different terminologies of mutual fund

Who is the regulatory authority for mutual fund

Marketing concept of mutual fund

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