Amfi Iap
Amfi Iap
Amfi Iap
Mutual Fund
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Your Investment Menu Card
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Cost of money lying idle
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Challenges involved investing directly in Capital Market
Requirement of Capital
Time
Expertise
Lack of Information
Portfolio
Volatility
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Key Investment Considerations
Liquidity
Plus Convenience
How easy is it to invest, disinvest
and adjust to your needs?
Post-tax Returns
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What is a Mutual Fund and Why invest in a Mutual Fund
A mutual fund is the trust that pools the savings of a number of investors
who share a common financial goal.
In the long term market based returns have the potential to perform better
than other assured return products.
Investment in a Mutual Fund is one of the most cost efficient way to invest
as it offers one of the lowest charges to the investor
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How Mutual Fund works?
A vehicle for investing in a diversified portfolio of stocks and bonds
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Structure of Mutual Fund
Custodian keeps safe custody of the investments (related documents of securities invested).
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Types of Mutual Fund
Types of
Mutual Funds
By
By
Investment
Constitution
Objective
Close Ended Open Ended Interval Equity Funds Debt Funds Liquid Funds
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Comparison: Equities to Gold, Debt and Inflation
All the values were rebased to 10 at the start of the Period. Data considered from March 30, 2002 till February 28, 2011. Source:
Bloomberg, AMFI India and World Gold Council.
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Advantages of Mutual Funds
1.Professional Management
2.Diversification
3.Convenient Administration
4.Return potential
5.Low cost
6.Liquidity
7.Transparency
8.Flexibility
9.Choice of schemes
10.Well regulated
11.Tax benefits
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How do I make money from a Mutual Fund?
1. Capital appreciation:
As the value of securities in the fund increases, the fund's unit
price will also increase. You can make a profit by selling the units
at a price higher than the price at which you bought the units.
2. Income Distribution:
The fund may distribute part of the appreciation to the investors as
dividend.
Disclaimer
As the value of securities in the fund increases, the fund's unit price will also increase or vice
a - versa. Mutual Fund does not guarantee any profit / income. If the funds unit price
decreases, there may be a capital loss
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How to invest in Mutual Funds
Selection Process- 3 step process
Step 3 Select the ideal
mix of schemes
Investing in just 1
scheme may not meet all
Step 2 Choose the right your investment needs.
mutual fund. You may consider
1. The track record of investing in a
performance over the last few combination of schemes
years in relation to the to achieve your specific
appropriate Benchmark and investment goals.
Step 1 Identify your similar funds in the same
investment needs category. (Disclaimer: Past performance
is no guide to future performance)
1. What are my investment
objectives and needs? 2. How well the mutual fund is
organized to provide efficient,
2. How much risk am I willing
prompt and personalized
to take?
service.
3. What are my cash flow
3. Degree of transparency as
requirements?
reflected in frequency and
quality of their communications.
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Please ask your financial advisor for details & advise 13
Mutual Fund Which one to buy?
Capital Capital
Generate Income
Preservation Appreciation
Mutual Funds
Liquid Funds Debt Funds Equity Funds
Disclaimer: As the value of securities in the fund increases, the fund's unit price will also increase or vice a versa. You can make a profit by selling the
units at a price higher than at which you bought. Although a Mutual Fund does not guarantee any profit / income.
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Mutual Fund Products Risk / Return Graph
Lo Med Hi Lo Med Hi
>> Risk << >> Risk <<
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Suggested Portfolio based on Risk tolerance
Aggressive Plan Moderate Plan
10-15% 10%
5%
30-40% 20%
10-20%
60-70%
40-50%
Growth Schemes
Income Schemes
Money Market Schemes
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Balanced Schemes
All the percentages refer to the Assets under management 16
Select a Mutual Fund
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Select a Mutual Fund
CRISIL~CPR Rankings and Value Research Star Rating are prominent ones
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Taxation Benefit investing in Mutual Funds
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Equity Linked Saving Schemes (ELSS) advantage: All about
80C Investments
Instrument Returns Lock In Period (in Years)
Employees Provident Fund (EPF) 8.50% Until Retirement
Public Provident Fund (PPF) 8% 15
National Saving Certificate (NSC) 8% 6
FDs Banks & Post office 5.70 to 8.50% 5
Senior Citizen Savings Scheme 9% 5
Life Insurance Policies 5 to 6% 3
Equity Linked Saving Scheme (ELSS) Market Linked 3
Unit Linked Insurance Plan (ULIP) Market Linked 3-5
New Pension Scheme (NPS) Market Linked till age 60
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Investment in Mutual Fund through SIP
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SIP: The Power of Compounding
SIP of Rs. 1000 invested per month assuming annual return of @ 8% pa till the age of 60.
25 4,20,000 23,09,175
30 3,60,000 15,00,295
35 3,00,000 9,57,367
40 2,40,000 5,92,947
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SIP: How Rupee Cost Averaging helps
This example uses assumed figures and is for illustrative purposes only.
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Mutual Fund: How to buy?
Financial Goals
Online Oine
Submit
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Mutual Fund: How to redeem?
Choose redemption
Submit
(Submit the form to the Branch of the specific Mutual Fund Co.)
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Demystifying NAV Net Asset Value
While selecting a fund, the NAV shouldnt be the criteria, a low NAV need not mean that
its a good buy ...
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Scheme Name NAV's on Growth
Jan 1st 2010 Oct 21st 2010
A 23.55 38.97 65.5%
B 7.44 12.04 61.8%
C 19.86 30.23 52.2%
D 21.70 31.57 45.5%
E 12.10 16.56 36.9%
In the above example during the period under consideration the best growths have been recorded by the
funds with the lowest (Scheme B Rs 7.44) and the highest (Scheme A- Rs 23.55) NAVs respectively.
On the other hand the least growth has been recorded by (Scheme E), a fund with a low NAV.
Clearly the data suggests that there is no correlation between the NAV per unit and the returns.
This example uses asumed figures and is for illustrative purpose only
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Types of risks associated with Mutual Fund Investment
Risk is an inherent aspect of every form of investment. For Mutual Fund investments, risks would include
variability, or period-by-period fluctuations in total return.
Market risk: At times the prices or yields of all the securities in a particular market rise or fall due to broad
outside influences. This change in price is due to 'market risk'.
Inflation risk: Sometimes referred to as 'loss of purchasing power'. Whenever the rate of inflation exceeds
the earnings on your investment, you run the risk that you'll actually be able to buy less, not more.
Credit risk: In short, how stable is the company or entity to which you lend your money when you invest?
How certain are you that it will be able to pay the interest you are promised, or repay your principal when the
investment matures?
Interest rate risk: Interest rate movements in the Indian debt markets can be volatile leading to the possibility
of large price movements up or down in debt and money market securities and thereby to possibly large
movements in the NAV.
Investment risks
Liquidity risk
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Summing up
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THANK YOU
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