Understanding

Investment through
Mutual Funds
When it Comes to Investing, We
believe person who speaks well
has the better view.

Myth 1: Mutual Funds are

Complex in Nature

I WOULD RATHER NOT TALK

ABOUT THEM AND MIND MY OWN
BUSINESS

Reality: Lets Understand the

Concept
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, are 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.

Mutual Fund Operation

Flow Chart

Structure of a Mutual
Fund

Why you should go for Mutual

Funds?

Expert on your side: When you invest in a mutual fund,

you buy into the experience and skills of a fund manager
and an army of professional analysts.

Limited risk: Mutual funds are diversification in action and

hence do not rely on the performance of a single entity.

More for less: For the price of one blue chip stock for
instance, you could get yourself a number of units across a
number of companies and industries when you invest in a
fund!.

Easy investing: You can invest in a mutual fund with as

little as Rs. 5,000. Salaried individuals also have the option
of investing in a monthly savings plan.

Convenience: You can investdirectly with afund house, or

through your bank orfinancial adviser,oreven over the
internet.

Contd..

Investor protection: A mutual fund in India is registered with

SEBI, which also monitors the operations of the fund to protect
your interests.

Quick access to your money: It's good to know that should you
need your money at short notice, you can usually get it in four
working days.

Transparency: As an investor, you get updates on the value of

your units, information on specific investments made by the
mutual fund and the fund manager's strategy and outlook.

Low transaction costs: A mutual fund, by sheer scale of its

investments is able to carry out cost-effective brokerage
transactions.

Tax benefits: Over the years, tax policies on mutual funds have
been favorable to investors and continue to be so.

Types of Schemes
Type of
Mutual Fund
Schemes
Structure
Open Ended
Funds
Close Ended
Funds
Interval Funds

Investment
Objective

Growth Funds
Income Funds
Balanced Funds
Money Market
Funds

Special
Schemes

Industry Specific
Schemes
Index
Schemes
Sectoral
Schemes

Myth 2: Mutual Fund Means

Equity
Reality: Mutual Funds have debt
scheme too.
Debt schemes invest in
Corporate and Govt. Bonds.
They are usually consider safe.
Some of Indias well known
entities find it suitable to invest
in bonds.

Risk Return Profile

Myth 3: I need a lot of Money to

invest in Mutual Funds

If I ask you to think what is the most

common character between Warren Buffet,
Rakesh Jhunjunwala, Ramdeo Agarwall ?

Its Actually
DISCIPLINE!!

The answer is Systematic

Investment Plan?
An investment plan to invest a fixed
amount regularly at a specified frequency
say, monthly or quarterly.
You can start SIP for just Rs 1000 a month.
You get Fewer units when the share prices are high,
and more units when the share prices are low. And
Average cost price tends to fall below the average
NAV.

SIP is a simple method of investing used

across the world as a means to creating wealth

Start Early : SIP

Rs. 1000 invested per month @15% p.a. till the age of 60 yrs (Rs in Lakhs)

 Systematic Transfer Plan (STP)

Invest in debt oriented fund and give instructions to
transfer a fixed sum, at a fixed interval, to an equity
scheme of the same mutual fund.

Systematic Withdrawal Plan (SWP)

Tired of your savings account?

Extra Cash in savings A/c?? Consider Cash Funds
Liquidity: Savings account wins

No cash withdrawls, no ATM (Now- Rel Regular Savings Fund).

Safety: Savings account wins

All mutual funds are subject to market risks

Returns: Cash funds win

Upto about 8-10% return

Performance: Cash funds win

Interest rate fluctuations covered by quick maturation

Invest when surplus money in savings a/c based on expense ratio.

 COSTS OF INVESTING
There are four costs associated with mutual
fund investing:

Initial Issue Expenses

Entry Load

Exit Load

Annual Recurring Expenses

Newly Introduced Direct Plans can
reduce this Cost- Even a 0.5% Diff
in NAV can make significant
Difference in Returns

How to evaluate a
Mutual Fund
Based on the Investment Objective &
Investment Goals of the Clients, we consider
following parameters:
Past Performance- Look at 1 Year, 3 Years, 5
Years ranking- www. Valueresearchonline.com
Past Performance- Look at the QoQ
performance for the last 2-3 years.
Look at the Alpha rather than Absolute
performance- Sell a fund if it is not generating
alpha for consequently 2-3 quarters.

Contd..
Look at the changes in Fund
Manager- Frequent changes are not
good.
Most importantly, look at the
expense ratio- It will eat up the
returns.
Look at Portfolio Diversification- too
much diversification reflects lack of
conviction of Fund Manager.
Is your Fund taking too much risk?

Mutual Funds V/s Investing at your

own
Invest on your own if you:
Have fairly strong speculative
instincts
Find the game of investing enjoyable
Have the time to manage your
investments
Can earn superior returns
Invest through a mutual fund if you:
Have a small amount to invest
Hold fewer than five stocks
Think that you need better advice on
investing
Have difficulty in deciding when to

Thank You
&
Start Investing
Now!!!