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Mutual Funds

Presented By:

Neeraj Shipra Jitender Gurpreet Sonam Tanmoy


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 realized is shared by its unit holders in proportion to the number of units owned by them. 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.

A Mutual Fund is a special type of institution , a trust or an investment company which acts as an investment intermediary and channelizes the savings of large number of people to the corporate securities in such a way that investors get steady returns, capital appreciation and a low risk. Mutual funds have a fund manager who invests the money on

behalf of the investors by buying / selling stocks, bonds etc.

First Mutual Fund : UTI in 1964 (UTI Act, 1963)

Types Of Mutual Fund Schemes:

Mutual funds Schemes can be segregated into three heads

1. Schemes according to Maturity Period:

A mutual fund scheme can be classified into open-ended scheme or close-ended scheme depending on its maturity period. Open-ended Fund/ Scheme Open-ended schemes are those schemes where investors can redeem and buy new units all throughout the year as per their convenience at NAV related prices. Close-ended Fund/ Scheme A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. 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 the units are listed. NOTE: SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor i.e. either repurchase facility or through listing on stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis.

2. Schemes according to Investment Objective:

Growth / Equity Oriented Scheme

Income / Debt Oriented Scheme

Balanced Fund
Money Market or Liquid Fund

Index Funds
Sector specific funds/schemes

Tax Saving Schemes

Other Schemes

3. By Nature
Equity Fund : Diversified Equity Funds Mid-Cap funds Sector Specific funds Tax Saving funds Debt Funds: Gilt Funds Income Funds Short Term Plans Liquid Funds Balanced Fund

The table below summarizes the funds according to their nature of risk
Nature of risk Low risk Categories of funds Money market funds G-Sec funds Moderate risk Income funds

Short term plans

Balanced funds High risk Index funds Growth funds Sector funds

Five key Players in a Mutual Fund Company
The sponsor(s)/The Board of Trustees (BOT)/Trust Company The Asset Management Company (AMC) The Unit Holders or Investors The Custodian


Association of Mutual Funds in India (AMFI) was incorporated on 22nd August, 1995. (AMFI) modeled on the lines of a Self Regulating Organization (SRO) with a view to 'promoting and protecting the interest of mutual funds and their unit-holders, increasing public awareness of mutual funds, and serving the investors interest by defining and maintaining high ethical and professional standards in the mutual funds industry' Association of Mutual Funds India has brought down the Indian mutual fund industry to a professional and healthy market with ethical lines enhancing and maintaining standards.

It follows the principle of both protecting and promoting the interests of mutual funds as well as their unit holders.

AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund industry. To recommend and promote best business practices and code of conduct to be followed by members and others engaged in the activities of mutual fund and asset management including agencies connected or involved in the field of capital markets and financial services. Association of Mutual Fund of India do represent the Government of India, the Reserve Bank of India and other related bodies on matters relating to the Mutual Fund Industry. It develops a team of well qualified and trained Agent distributors. It implements a programme of training and certification for all intermediaries and other engaged in the mutual fund industry.

AMFI undertakes all India awareness programme for investors in order to promote proper understanding of the concept and working of mutual funds. Association of mutual fund of India also disseminate information on Mutual Fund Industry and undertakes studies and research either directly or in association with other bodies.

Advantages of investing in a Mutual Fund

1. 2. 3. 4. 5. 6. 7. 8. 9. Professional Management Diversification Reduced Risk Liquidity & Flexibility Low transaction Costs Taxes Benefit Wide Choice of Schemes Higher Returns Investor Protection

Risks Associated with Mutual Funds

Professional Management- Some funds dont perform in the market, as
their management is not dynamic enough to explore the available opportunity in the market.

Costs The biggest source of AMC income is generally from the entry & exit load
which they charge from investors, at the time of purchase. The mutual fund industries are thus charging extra cost under layers of jargon.

Dilution - Because funds have small holdings across different companies, high
returns from a few investments often don't make much difference on the overall return.

Taxes - when making decisions about your money, fund managers don't consider
your personal tax situation. For example, when a fund manager sells a security, a capital-gain tax is triggered, which affects how profitable the individual is from the sale.

Problems Of Mutual Funds

Liquidity Crisis Lack of Innovation Inadequate Disclosure Increased Competition Lack of Transparency No Provision for Performance Guarantee


The recent trends since last year clearly suggest that the average investors have lost money in equity. People have now started opting for portfolio managers. Entrance of multinational companies. Professional expertise to manage funds worldwide. Mutual funds in India now offer a wide range of schemes to choose. Mutual funds are turned to be the most preferred choice worldwide for both small and big investors due to their numerous advantages which include diversification, professional management, potential of returns, efficiency and easy to use.