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Understanding Mutual Funds and Investors

1) A mutual fund is a collection of stocks, bonds, and other securities that are managed by professional investors on behalf of fund shareholders. Investors purchase shares of the fund, owning a portion of the overall portfolio. 2) Mutual funds offer investors various benefits like professional management, diversification, convenience, low costs, and liquidity. They provide investors options to invest based on their risk tolerance and return expectations. 3) There are different types of mutual funds categorized by the type of securities they invest in - equity funds, debt funds, and liquid funds. Equity funds invest in stocks and have higher risk but also higher potential returns. Debt funds invest in bonds and have lower risk but also lower

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12 views18 pages

Understanding Mutual Funds and Investors

1) A mutual fund is a collection of stocks, bonds, and other securities that are managed by professional investors on behalf of fund shareholders. Investors purchase shares of the fund, owning a portion of the overall portfolio. 2) Mutual funds offer investors various benefits like professional management, diversification, convenience, low costs, and liquidity. They provide investors options to invest based on their risk tolerance and return expectations. 3) There are different types of mutual funds categorized by the type of securities they invest in - equity funds, debt funds, and liquid funds. Equity funds invest in stocks and have higher risk but also higher potential returns. Debt funds invest in bonds and have lower risk but also lower

Uploaded by

sukacini
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd

MUTUAL FUND-A NEW ERA IN

FINANCING

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and
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Lecturers
Dept of Commerce,
Auxilium College(Autonomous)
vellore-6
What is a Mutual Fund?

Leaving formal definition to experts, A mutual fund


simply put is a collection of stocks and/or bonds.

You can think of a mutual fund as a company that


brings together a group of people and invests their
money in stocks, bonds, and other securities. Each
investor owns shares, which represent a portion of the
holdings of the fund.
Different types of Investors

This type of investor Can And needs this kind of


take… investment….
Young & Unmarried Reasonably High Risk With High Return
well paid job.

Middle aged executive with 2 to Moderate With Moderate Risk and


3 dependents Risk Medium range returns

About to retire or recently Only Low With Low risk and steady and
retired risk regular returns

Doing business and having some Low risk With low to Medium risk but
money for rotation with lot of liquidity

Small time employee who can Low risk With low to Medium risk and
only invest little amount but can focused on Small and Regular
invest regularly savings
Different Investment Avenues

[Link] Investment Avenue Risk Return Tracking


Requirement
1 Stock Market High High High
2 Fixed deposits in Low Low Low
Banks
3 Government Bonds Medium Medium Low
4 Fixed Deposits in High Medium Medium
NBFCs
5 Chit funds High Medium Medium
6 Real estate Medium Medium Medium
7 Other money lending High Medium Depends
options
Why Mutual Fund?
Different types of Investors…
…….With Different Investment Avenues
And common investment expectations

• Balanced Risk / Return Ratios


• More choice of investments
• Convenience of Investment
• Low Transaction costs
• Value Added Services
• Moderate Liquidity Option
• Ideally advised or even managed by a Professional
Why Mutual Fund?
Advantages

 Professionally Managed
 Balanced Risk / Return Ratios
 Wide choice of investments
 Convenience of Investment
 Low Transaction costs
 Value Added Services
 Easy Liquidity Option
 Highly Regulated
 Choice of Systematic and Methodical Investments
Types of funds

Like human beings, Mutual funds also come in various


sizes and shapes.

There are about dozen fund classes but all of them are
derivatives of three basic fund types:
Equity
Debt
Liquid
Types of funds

Equity : They provide Long term growth.


These funds invest in equities.
Their risk level is high so is the return.

Debt : This type of funds provide regular income.


Invest in debt instruments like bonds etc.,
Their risk / return levels are medium

Liquid : Provide Liquidity


Invest in Money market instruments
Most volatile but safer and give lower returns.
Also known as Cash or Money market funds.
EXAMPLES FOR TYPES OF MUTUAL
FUNDS
A COMPARISON….
In a bank…… In a Mutual fund….

You open an account with You subscribe and buy units in


initial deposit a scheme

You will deposit additional Do additional purchase


money
You Withdraw money You redeem units

You opt for a recurring deposit Start a Systematic Investment


Plan
Transaction Types
[Link] Transaction Description

1 New Purchase New investment. Buying units in a scheme

2 Additional Purchase Buying additional units in a scheme

3 Redemption Selling units and getting the money back

4 Switch / Shift Transferring investment from one scheme to the other

5 Dividend When AMC announces dividend in a scheme

6 Systematic investment Investing fixed amounts periodically like a Recurring deposit

7 Systematic withdrawal Reverse of Systematic Investment. Selling units periodically

8 Systematic transfer Transferring units / amount from one scheme to the other
periodically

9 Change of Address Notifying the Change of residential address

10 Change of Bank Change of investor bank details

11 Consolidation Clubbing various investments in to a single account

12 Pledge / Lien Pledging units in a bank to avail loan


Mutual Fund Frame Work

Sponsors

Trustees

Mutual Fund

AMC Custodian Registrar Distributors

Fund
Management Investor Service Agents/
Centers Financial
Advisors
Cash
Management
Investors

AMFI
SEBI
The MF
The Govt
Association
regulatory Body
Growth of Mutual Fund in India

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