Various Third party products

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

BRIEF HISTORY.
The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative 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 India

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 the common man as it offers an opportunity to invest in a diversified professionally managed basket of securities at a relatively low cost.

Introduction to Mutual Fund

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

Organisation of Mutual Fund

Advantages of mutual fund

Professional Management Diversification Return Potential Low Costs Liquidity Transparency Flexibility Choice of Schemes Tax Benefits Well Regulated

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

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. At the 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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