Professional Documents
Culture Documents
annuities, real estate, and precious metals), but the majority of mutual funds invest in stocks and/or
bonds.
Unit Trust of India is the first Mutual Fund set up under a separate
act, UTI Act in 1963, and started its operations in 1964 with the issue
of units under the scheme US-64.
BY STRUCTURE
Open Ended Schemes
An open-end fund is one that is available for subscription all through the year. These do not
have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV")
related prices. The key feature of open-end schemes is liquidity.
Close Ended Schemes
A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15
years. The fund is open for subscription only during a specified period. Investors can invest in the
scheme at the time of the initial public issue and thereafter they can buy or sell the units of the
scheme on the stock exchanges where they are listed. In order to provide an exit route to the
investors, some close-ended funds give an option of selling back the units to the Mutual Fund
through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of
the two exit routes is provided to the investor.
Interval Schemes
Interval Schemes are that scheme, which combines the features of open-ended and closeended schemes. The units may be traded on the stock exchange or may be open for sale or
redemption during pre-determined intervals at NAV related prices.
BY NATURE
1. Equity fund:
These funds invest a maximum part of their corpus into equities holdings. The structure of the
fund may vary different for different schemes and the fund managers outlook on different stocks.
The Equity Funds are sub-classified depending upon their investment objective, as follows:
Mid-Cap Funds
Equity investments are meant for a longer time horizon, thus Equity funds rank high on the
risk-return matrix.
2. Debt funds:
The objective of these Funds is to invest in debt papers. Government authorities, private
companies, banks and financial institutions are some of the major issuers of debt papers. By
investing in debt instruments, these funds ensure low risk and provide stable income to the
investors. Debt funds are further classified as:
Gilt Funds: Invest their corpus in securities issued by Government, popularly known as
Government of India debt papers. These Funds carry zero Default risk but are associated
with Interest Rate risk. These schemes are safer as they invest in papers backed by
Government.
Income Funds: Invest a major portion into various debt instruments such as bonds,
corporate debentures and Government securities.
MIPs: Invests maximum of their total corpus in debt instruments while they take minimum
exposure in equities. It gets benefit of both equity and debt market. These scheme ranks
slightly high on the risk-return matrix when compared with other debt schemes.
Short Term Plans (STPs): Meant for investment horizon for three to six months. These
funds primarily invest in short term papers like Certificate of Deposits (CDs) and
Commercial Papers (CPs). Some portion of the corpus is also invested in corporate
debentures.
Liquid Funds: Also known as Money Market Schemes, These funds provides easy
liquidity and preservation of capital. These schemes invest in short-term instruments like
Treasury Bills, inter-bank call money market, CPs and CDs. These funds are meant for
short-term cash management of corporate houses and are meant for an investment horizon
of 1day to 3 months. These schemes rank low on risk-return matrix and are considered to be
the safest amongst all categories of mutual funds.
3. Balanced funds: As the name suggest they, are a mix of both equity and debt funds. They invest
in both equities and fixed income securities, which are in line with pre-defined investment
objective of the scheme. These schemes aim to provide investors with the best of both the worlds.
Equity part provide growth and the debt part provides stability in returns.
Further the mutual funds can be broadly classified on the basis of investment parameter viz,
Each category of funds is backed by an investment philosophy, which is pre-defined in the
objectives of the fund. The investor can align his own investment needs with the funds objective
and invest accordingly.
BY INVESTMENT OBJECTIVE
Growth Schemes: Growth Schemes are also known as equity schemes. The aim of these
schemes is to provide capital appreciation over medium to long term. These schemes
normally invest a major part of their fund in equities and are willing to bear short-term
decline in value for possible future appreciation.
Income Schemes: Income Schemes are also known as debt schemes. The aim of these
schemes is to provide regular and steady income to investors. These schemes generally
invest in fixed income securities such as bonds and corporate debentures. Capital
appreciation in such schemes may be limited.
Balanced Schemes: Balanced Schemes aim to provide both growth and income by
periodically distributing a part of the income and capital gains they earn. These schemes
invest in both shares and fixed income securities, in the proportion indicated in their offer
documents (normally 50:50).
Money Market Schemes: Money Market Schemes aim to provide easy liquidity,
preservation of capital and moderate income. These schemes generally invest in safer, shortterm instruments, such as treasury bills, certificates of deposit, commercial paper and interbank call money.
OTHER SCHEMES
Tax Saving Schemes: Tax-saving schemes offer tax rebates to the investors under tax laws
prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions made to
any Equity Linked Savings Scheme (ELSS) are eligible for rebate.
Index Schemes: Index schemes attempt to replicate the performance of a particular index
such as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only
those stocks that constitute the index. The percentage of each stock to the total holding will
be identical to the stocks index weightage. And hence, the returns from such schemes would
be more or less equivalent to those of the Index.
Sector Specific Schemes: These are the funds/schemes which invest in the securities of
only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals,
Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in
these funds are dependent on the performance of the respective sectors/industries. While
these funds may give higher returns, they are more risky compared to diversified funds.
Investors need to keep a watch on the performance of those sectors/industries and must exit
at an appropriate time.
Types of returns
There are three ways, where the total returns provided by mutual funds can be enjoyed by
investors:
Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all
income it receives over the year to fund owners in the form of a distribution.
If the fund sells securities that have increased in price, the fund has a capital gain. Most
funds also pass on these gains to investors in a distribution.
If fund holdings increase in price but are not sold by the fund manager, the fund's shares
increase in price. You can then sell your mutual fund shares for a profit. Funds will also
usually give you a choice either to receive a check for distributions or to reinvest the
earnings and get more shares.
Scheme Name
Date
Mar 26
, 2008
Mar 26
, 2008
Mar 26
, 2008
Mar 26
, 2008
Mar 26
, 2008
Mar 26
, 2008
2
3
4
5
6
7
8
9
10
11
12
13
14
Mar 26
, 2008
Mar 26
, 2008
Mar 26
, 2008
Mar 25
, 2008
Mar 26
, 2008
Mar 26
, 2008
Mar 26
, 2008
Mar 25
, 2008
NAV
(Rs.)
8.45
Last 1
Week
5.12
Since
Inception
-94.64
8.26
5.05
-40.42
12.44
5.03
15.35
14.07
20.92
9.01
4.65
-17.17
10.2
4.62
23.69
9.93
4.56
-0.85
10.19
4.51
22.39
6.36
3.75
-81.78
124.66
3.44
29.97
141.51
3.14
13.71
9.89
2.91
-7.88
10.25
2.38
2.39
7.64
1.86
-49.52
15
Mar 26
, 2008
9.93
1.58
-0.94
A mutual fund is a professionally-managed firm of collective investments that pools money from
many investors and invests it in stocks, bonds, short-term money market instruments, and/or other
securities.in other words we can say that A Mutual Fund is a trust registered with the Securities and
Exchange Board of India (SEBI), which pools up the money from individual / corporate investors
and invests the same on behalf of the investors /unit holders, in equity shares, Government
securities, Bonds, Call money markets etc., and distributes the profits.
The value of each unit of the mutual fund, known as the net asset value (NAV), is mostly
calculated daily based on the total value of the fund divided by the number of shares currently
issued and outstanding. The value of all the securities in the portfolio in calculated daily. From this,
all expenses are deducted and the resultant value divided by the number of units in the fund is the
funds NAV.
NAV =
Advantages of a MF
Mutual Funds provide the benefit of cheap access to expensive stocks
Mutual funds diversify the risk of the investor by investing in a basket of assets
A team of professional fund managers manages them with in-depth research inputs
from investment analysts.
Being institutions with good bargaining power in markets, mutual funds have access
to crucial corporate information, which individual investors cannot access.
1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and
Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI
Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank
Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund
(Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its
mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.At the end of
1993, the mutual fund industry had assets under management of Rs.47,004 crores.
Third Phase 1993-2003 (Entry of Private Sector Funds)
1993 was the year in which the first Mutual Fund Regulations came into being, under which all
mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now
merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised
Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund)
Regulations 1996. As at the end of January 2003, there were 33 mutual funds with total assets of
Rs. 1,21,805 crores.
Open-ended funds: Investors can buy and sell the units from the fund, at any point of time.
Close-ended
funds: These funds raise money from investors only once. Therefore, after the
offer period, fresh investments can not be made into the fund. If the fund is listed on a
stocks exchange the units can be traded like stocks (E.g., Morgan Stanley Growth Fund).
Recently, most of the New Fund Offers of close-ended funds provided liquidity window on
a periodic basis such as monthly or weekly. Redemption of units can be made during
specified intervals. Therefore, such funds have relatively low liquidity.
Based on their investment objective:
Equity funds: These funds invest in equities and equity related instruments. With fluctuating share
prices, such funds show volatile performance, even losses. However, short term fluctuations in the
market, generally smoothens out in the long term, thereby offering higher returns at relatively lower
volatility. At the same time, such funds can yield great capital appreciation as, historically, equities
have outperformed all asset classes in the long term. Hence, investment in equity funds should be
considered for a period of at least 3-5 years. It can be further classified as:
i) Index funds- In this case a key stock market index, like BSE Sensex or Nifty is tracked. Their
portfolio mirrors the benchmark index both in terms of composition and individual stock
weightages.
ii) Equity diversified funds- 100% of the capital is invested in equities spreading across different
sectors and stocks.
iii) Dividend yield funds- it is similar to the equity diversified funds except that they invest in
companies offering high dividend yields.
iv) Thematic funds- Invest 100% of the assets in sectors which are related through some theme.
e.g. -An infrastructure fund invests in power, construction, cements sectors etc.
v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector fund will
invest in banking stocks.
vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.
Balanced fund: Their investment portfolio includes both debt and equity. As a result, on the risk-return
ladder, they fall between equity and debt funds. Balanced funds are the ideal mutual funds vehicle for
investors who prefer spreading their risk across various instruments. Following are balanced funds classes:
money markets. Higher proportion (around 75%) is put in money markets, in the absence of
arbitrage opportunities.
v)Gilt funds LT- They invest 100% of their portfolio in long-term government securities.
vi) Income funds LT- Typically, such funds invest a major portion of the portfolio in long-term debt
papers.
vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an exposure of 10%30% to equities.
viii)FMPs- fixed monthly plans invest in debt papers whose maturity is in line with that of the
fund.
Investment strategies:
1. Systematic Investment Plan: under this a fixed sum is invested each month on a fixed date of a
month. Payment is made through post dated cheques or direct debit facilities. The investor gets
fewer units when the NAV is high and more units when the NAV is low. This is called as the benefit
of Rupee Cost Averaging (RCA)
2. Systematic Transfer Plan:
instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutual
fund.
3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund then he can
withdraw a fixed amount each month.
The entire mutual fund industry operates in a very organized way. The investors, known as unit
holders,handover their savings to the AMCs under various schemes. The objective of the
investment should match with the objective of the fund to best suit the investors needs. The AMCs
further invest the funds into various securities according to the investment objective. The return
generated from the investments is passed on to the investors or reinvested as mentioned in the offer
document.
Working
Of
Mutual Fund
Mutual Funds
Before we understand what is mutual fund, its very important to know the area in which
mutual funds works, the basic understanding of stocks and bonds.
Stocks : Stocks represent shares of ownership in a public company. Examples of public companies
include Reliance, ONGC and Infosys. Stocks are considered to be the most common owned
investment traded on the market.
Bonds : Bonds are basically the money which you lend to the government or a company, and in
return you can receive interest on your invested amount, which is back over predetermined
amounts of time. Bonds are considered to be the most common lending investment traded on the
market. There are many other types of investments other than stocks and bonds (including
annuities, real estate, and precious metals), but the majority of mutual funds invest in stocks and/or
bonds.
What Is Mutual Fund
A mutual fund is just the connecting bridge or a financial intermediary that allows a group
of investors to pool their money together with a predetermined investment objective. The mutual
fund will have a fund manager who is responsible for investing the gathered money into specific
securities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions of
the mutual fund and thus on investing becomes a shareholder or unit holder of the fund.
Mutual funds are considered as one of the best available investments as compare to others
they are very cost efficient and also easy to invest in, thus by pooling money together in a mutual
fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do
it on their own. But the biggest advantage to mutual funds is diversification, by minimizing risk &
maximizing returns.
Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity
to invest in a diversified, professionally managed basket of securities at a relatively low cost. The
flow chart below describes broadly the working of a mutual fund
Interval Schemes
Interval Schemes are that scheme, which combines the features of open-ended and closeended schemes. The units may be traded on the stock exchange or may be open for sale or
redemption during pre-determined intervals at NAV related prices.
BY NATURE
Under this the mutual fund is categorized on the basis of Investment Objective. By nature the
mutual fund is categorized as follow:
1. Equity fund:
These funds invest a maximum part of their corpus into equities holdings. The structure of the
fund may vary different for different schemes and the fund managers outlook on different stocks.
The Equity Funds are sub-classified depending upon their investment objective, as follows:
Mid-Cap Funds
Equity investments are meant for a longer time horizon, thus Equity funds rank high on the
risk-return matrix.
2. Debt funds:
The objective of these Funds is to invest in debt papers. Government authorities, private
companies, banks and financial institutions are some of the major issuers of debt papers. By
investing in debt instruments, these funds ensure low risk and provide stable income to the
investors. Debt funds are further classified as:
Gilt Funds: Invest their corpus in securities issued by Government, popularly known as
Government of India debt papers. These Funds carry zero Default risk but are associated
with Interest Rate risk. These schemes are safer as they invest in papers backed by
Government.
Income Funds: Invest a major portion into various debt instruments such as bonds,
corporate debentures and Government securities.
MIPs: Invests maximum of their total corpus in debt instruments while they take minimum
exposure in equities. It gets benefit of both equity and debt market. These scheme ranks
slightly high on the risk-return matrix when compared with other debt schemes.
Short Term Plans (STPs): Meant for investment horizon for three to six months. These
funds primarily invest in short term papers like Certificate of Deposits (CDs) and
Commercial Papers (CPs). Some portion of the corpus is also invested in corporate
debentures.
Liquid Funds: Also known as Money Market Schemes, These funds provides easy
liquidity and preservation of capital. These schemes invest in short-term instruments like
Treasury Bills, inter-bank call money market, CPs and CDs. These funds are meant for
short-term cash management of corporate houses and are meant for an investment horizon
of 1day to 3 months. These schemes rank low on risk-return matrix and are considered to be
the safest amongst all categories of mutual funds.
3. Balanced funds: As the name suggest they, are a mix of both equity and debt funds. They
invest in both equities and fixed income securities, which are in line with pre-defined investment
objective of the scheme. These schemes aim to provide investors with the best of both the worlds.
Equity part provides growth and the debt part provides stability in returns.
Further the mutual funds can be broadly classified on the basis of investment parameter viz,
Each category of funds is backed by an investment philosophy, which is pre-defined in the
objectives of the fund. The investor can align his own investment needs with the funds objective
and invest accordingly.
BY INVESTMENT OBJECTIVE
Growth Schemes: Growth Schemes are also known as equity schemes. The aim of these
schemes is to provide capital appreciation over medium to long term. These schemes
normally invest a major part of their fund in equities and are willing to bear short-term
decline in value for possible future appreciation.
Income Schemes: Income Schemes are also known as debt schemes. The aim of these
schemes is to provide regular and steady income to investors. These schemes generally
invest in fixed income securities such as bonds and corporate debentures. Capital
appreciation in such schemes may be limited.
Balanced Schemes: Balanced Schemes aim to provide both growth and income by
periodically distributing a part of the income and capital gains they earn. These schemes
invest in both shares and fixed income securities, in the proportion indicated in their offer
documents (normally 50:50).
Money Market Schemes: Money Market Schemes aim to provide easy liquidity,
preservation of capital and moderate income. These schemes generally invest in safer, shortterm instruments, such as treasury bills, certificates of deposit, commercial paper and interbank call money.
OTHER SCHEMES
Tax Saving Schemes: Tax-saving schemes offer tax rebates to the investors under tax laws
prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions made to
any Equity Linked Savings Scheme (ELSS) are eligible for rebate.
Index Schemes: Index schemes attempt to replicate the performance of a particular index
such as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only
those stocks that constitute the index. The percentage of each stock to the total holding will
be identical to the stocks index weightage. And hence, the returns from such schemes would
be more or less equivalent to those of the Index.
Sector Specific Schemes: These are the funds/schemes which invest in the securities of
only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals,
Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in
these funds are dependent on the performance of the respective sectors/industries. While
these funds may give higher returns, they are more risky compared to diversified funds.
Investors need to keep a watch on the performance of those sectors/industries and must exit
at an appropriate time.
Types of returns:
There are three ways, where the total returns provided by mutual funds can be enjoyed by
investors:
Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all
income it receives over the year to fund owners in the form of a distribution.
If the fund sells securities that have increased in price, the fund has a capital gain. Most
funds also pass on these gains to investors in a distribution.
If fund holdings increase in price but are not sold by the fund manager, the fund's shares
increase in price. You can then sell your mutual fund shares for a profit. Funds will also
usually give you a choice either to receive a check for distributions or to reinvest the
earnings and get more shares.
To protect the interest of the investors, SEBI formulates policies and regulates the mutual
funds. It notified regulations in 1993 (fully revised in 1996) and issues guidelines from time to
time.
SEBI approved Asset Management Company (AMC) manages the funds by making
investments in various types of securities. Custodian, registered with SEBI, holds the securities
of
various
schemes
of
the
fund
in
its
custody.
According to SEBI Regulations, two thirds of the directors of Trustee Company or board of
trustees must be independent.
The Association of Mutual Funds in India (AMFI) reassures the investors in units of mutual
funds that the mutual funds function within the strict regulatory framework. Its objective is to
increase public awareness of the mutual fund industry. AMFI also is engaged in upgrading
professional standards and in promoting best industry practices in diverse areas such as
valuation, disclosure, transparency etc.
Offer document: An offer document is issued when the AMCs make New Fund Offer(NFO).
Its advisable to every investor to ask for the offer document and read it before investing. An
QUESTIONNAIRE
A study of preferences of the investors for investment in mutual funds.
1. Personal Details:
(a). Name:(b). Add: -
Phone:-
(c). Age:-
(d). Qualification:Graduation/PG
Under Graduate
Others
Pvt. Ser
Business
Agriculture
Others
Rs. 10,001 to
15000
Rs. 15,001 to
20,000
Rs. 20,001 to
30,000
2. What kind of investments you have made so far? Pl tick (). All applicable.
a. Saving account
e. Post Office-NSC, etc
b. Fixed deposits
f. Shares/Debentures
c. Insurance
g. Gold/ Silver
d. Mutual Fund
h. Real Estate
(d) Trust
4. Are you aware about Mutual Funds and their operations? Pl tick ().
Yes
No
b. Peer Group
c. Banks
d. Financial Advisors
Yes
No
8. If yes, in which Mutual Fund you have invested? Pl. tick (). All applicable.
a. SBIMF
b. UTI
c. HDFC
d. Reliance
e. Kotak
f. Other. specify
12. Which Channel will you prefer while investing in Mutual Fund?
(a) Financial Advisor
(b) Bank
(c) AMC
13. When you invest in Mutual Funds which mode of investment will you prefer? Pl. tick ().
a. One Time Investment
14. When you want to invest which type of funds would you choose?
a. Having only debt
portfolio
15. How would you like to receive the returns every year? Pl. tick ().
a. Dividend payout
b. Dividend re-investment
c. Growth in NAV
16. Instead of general Mutual Funds, would you like to invest in sectorial funds?
Please tick ().
Yes
No