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Seminar
On
Mutual Funds
Submitted To: Submitted By:
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Content
Mutual Funds
Types of Mutual Funds
Organization of a Mutual Fund
Investment strategies
Advantages of Mutual Funds
Disadvantages of Mutual Funds
Future of Mutual Fund in India
Conclusion
Reference
Introduction
Mutual funds are one of the most popular
investment options these days. A mutual fund is an
investment vehicle formed when an asset
management company (AMC) or fund house pools
investments from several individuals and
institutional investors with common investment
objectives. A fund manager, who is a finance
professional, manages the pooled investment. The
fund manager purchases securities such as stocks
and bonds that are in line with the investment
mandate.
Mutual Funds
A Mutual Fund 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.
Myths about Mutual Funds
1. Mutual Funds invest only in shares.
2. Mutual Funds are prone to very high risks/actively traded.
3. Mutual Funds are very new in the financial market.
4. Mutual Funds are not reliable and people rarely invest in
them.
5. The good thing about Mutual Funds is that you don’t have
to pay attention to them.
History of MF’s
History of MF’s can be discussed in two parts :
1) Emergence through public players; and
2) Emergence through private players
History of Mutual Funds
Phase I – 1964 – 87: In 1963, UTI was set up by
Parliament under UTI act and given a monopoly. The first
equity fund was launched in 1986.
Phase II – 1987 – 93: Non-UTI, Public Sector mutual
funds.
Like- SBI Mutual Fund,
Canbank Mutual Fund,
LIC Mutual Fund,
Indian Bank Mutual Fund,
GIC Mutual Fund and
PNB Mutual Fund.
History of Mutual Funds
Phase III – 1993 – 96: Introducing private sector funds. As
well as open-end funds.
Phase IV – 1996: Investor friendly regulatory measures
Action taken by SEBI to protect the investor, and
To enhance investor’s returns through tax benefits.
TYPES OF MUTUAL FUNDS
By Structure: By Investment
Objective:
Open-ended Funds Growth Funds
Closed-ended Funds Income Funds
Interval Funds Balanced Funds
Money Market Funds
Load Funds
No-Load Funds
Organization of a Mutual Fund
Investment strategies
Systematic Investment Plan (SIP)
Invest a fixed sum every month. (6 months to 10 years-
through post-dated cheques or Direct Debit facilities)
Fewer units when the share prices are high, and more units
when the share prices are low.
Convenience and Discipline are the benefits of SIP.
Systematic Withdrawal Plan (SWP)
Is a facility provided by a mutual fund to withdraw
money on a regular basis.
Advantages of Mutual Funds
• Portfolio diversification: It enables him to hold a diversified investment portfolio
even with a small amount of investment like Rs. 2000/-.
• Professional management: The investment management skills, along with the
needed research into available investment options, ensure a much better return as
compared to what an investor can manage on his own.
• Reduction/Diversification of Risks: The potential losses are also shared with other
investors.
• Reduction of transaction costs: The investor has the benefit of economies of scale;
the funds pay lesser costs because of larger volumes and it is passed on to the
investors.
• Wide Choice to suit risk-return profile: Investors can chose the fund based on
their risk tolerance and expected returns.
Advantages of Mutual Funds
Liquidity: Investors may be unable to sell shares directly, easily and quickly.
When they invest in mutual funds, they can cash their investment any time by
selling the units to the fund if it is open-ended and get the intrinsic value.
Investors can sell the units in the market if it is closed-ended fund.
Convenience and Flexibility: Investors can easily transfer their holdings
from one scheme to other, get updated market information and so on. Funds
also offer additional benefits like regular investment and regular withdrawal
options.
Transparency: Fund gives regular information to its investors on the value of
the investments in addition to disclosure of portfolio held by their scheme, the
proportion invested in each class of assets and the fund manager's investment
strategy and outlook
Disadvantages of Mutual Funds
No control over costs: The investor pays investment management fees as long
as he remains with the fund, even while the value of his investments are
declining. He also pays for funds distribution charges which he would not incur
in direct investments.
No tailor-made portfolios: The very high net-worth individuals or large
corporate investors may find this to be a constraint as they will not be able to
build their own portfolio of shares, bonds and other securities.
Managing a portfolio of funds: Availability of a large number of funds can
actually mean too much choice for the investor. So, he may again need advice
on how to select a fund to achieve his objectives.
Delay in redemption: It takes 3-6 days for redemption of the units and the
money to flow back into the investor’s account.
Future of MF India
By end of 2012, the mutual fund industry of India will
reach Rs 40,90,000 crore. In the coming 10 years the
annual composite growth rate is expected to go up by
13.4%. Since the last 5 years, the growth rate was
recorded as 9% annually.
Future of Mutual Funds in India - An Overview
Financial experts believe that the future of Mutual Funds
in India will be very bright. It has been estimated that by
March-end of 2010, the mutual fund industry of India will
reach Rs 40,90,000 crore, taking into account the total
assets of the Indian commercial banks.
The estimation was based on the December 2004 asset
value of Rs 1,50,537 crore. In the coming 10 years the
annual composite growth rate is expected to go up by
13.4%. Since the last 5 years, the growth rate was recorded
as 9% annually. Based on the current rate of growth, it can
be forecasted that the mutual fund assets will be double by
2010.
Conclusion
The Mutual Fund Industry is a growth industry
Mutual Funds cover a spectrum of Investment Options
Start Investing Early & Systematically
We invest directly or through a Professional Money
Manager
Reference
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