Wealth management session 2

Welcome to the Wealth management course ,[object Object],S G Raja Sekharan,[object Object]

WHAT IS MUTUAL FUND?,[object Object],A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests typically in investment securities like stocks, bonds, short-term money market instruments, other mutual funds, other securities, and/or commodities such as precious metals,[object Object]

WHAT IS MUTUAL FUND?,[object Object],The mutual fund will have a fund manager that trades (buys and sells) the fund's investments in accordance with the fund's investment objective,[object Object],The income earned through these investments and the capital appreciation realized are shared by its unit holders(investors) in proportion to the number of units owned by them,[object Object]

Why invest in a MUTUAL FUND?,[object Object],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,[object Object]

ADVANTAGES OF MUTUAL FUNDS,[object Object],Affordable,[object Object],Professional Management ,[object Object],Diversification ,[object Object],Liquidity ,[object Object],Tax benefits ,[object Object],Well regulated and low cost ,[object Object],Transparency ,[object Object],Flexibility ,[object Object],Choice of schemes,[object Object]

DISADVANTAGES OF INVESTING THROUGH MF,[object Object],NO TAILOR-MADE PORTFOLIO,[object Object]

Mutual Fund Operation Flow Chart,[object Object]

HISTORY OF MF IN INDIA,[object Object],MF INDUSTRY STARTED IN INDIA IN 1963 WITH FORMATION OF UTI,[object Object],DIFFERENT PAHSES : ,[object Object],PHASE -1(UTI),[object Object],PHASE-2 (ENTRY OF PUBLIC SECTOR MFs),[object Object],PAHSE-3 (ENTRY OF PRIVATE MFs),[object Object],PHASE-4 (UNDER SEBI REGULATION),[object Object]

PHASE-1 (1963 -1987) -,[object Object],ESTABLISHMENT OF UTI IN 1963,[object Object],LAUNCH OF FIRST SCHEME US-64,[object Object],FOLLOWED BY ULIP IN 1971,CGGF(1986), MASTERSHARE(1987),[object Object],UTI WAS THE ONLY PLAYER IN THE MARKET WITH MONOPOLY POWER,[object Object],HUGE MOBILIZATION OF FUNDS ,[object Object]

PHASE-2 (1987 -1993) -,[object Object],ESTABLISHMENT OF SBI-MF---THE FIRST NON-UTI MF THAT STARTED IN 1987,[object Object],FOLLOWED BY CANBANK-MF, LIC-MF,BOI-MF,[object Object],CHANGE IN THE MIND SET OF THE INVESTORS,[object Object],UTI STILL THE UNDISPUTED LEADER OF THE MARKET,[object Object],THERE WERE NO PRIVATE SECTOR PLAYERS AT THIS STAGE,[object Object]

PHASE-3(1993 -1996) -,[object Object],ENTRY OF THE PRIVATE SECTOR FUNDS IN 1993,[object Object],JV OF FOREIGN FUND MANANGEMENT COMPANIES WITH INDIAN PROMOTERS,[object Object],MORE COMPETITIVE PRODUCT INNOVATION, INVESTMENT MANAGEMENT TECHNIQUES, INVESTORS SERVICING TECHNIQUES CAME INTO INDIA,[object Object],INVESTORS STARTED BECOME SELECTIVE,[object Object]

PHASE-4 ( 1996 onwards ),[object Object],SEBI- THE REGULATORY AUTHORITY SEBI MF REGULATION 1996,[object Object],UTI CAME UNDER SEBI REGULATION VOLUNTARILY,[object Object],GOVT.’S STEPS FOR INVESTORS’ PROTECTION,[object Object]

TYPES OF Mutual funds – by structure,[object Object],Open ended -theses schemes do not have a fixed maturity period –they are available for subscription and repurchase on a continuous basis,[object Object],Close ended –these have a stipulated maturity period of 5-7 years – they are open to subscription only during the period of launch. They can be bought and sold in stock exchanges where they are listed. Exit routes are also provided by the fund through repurchase at specific points of time.,[object Object]

TYPES OF Mutual funds – by investment objectives,[object Object],Growth equity schemes –they provide capital appreciation over medium to long term – they carry risk of equity exposure.,[object Object],Income /Debt schemes –these aim at providing regular income to the investors by investing in debt instruments like bonds, corporate debentures, govt securities, money market instruments etc.,[object Object],Balanced funds –these provide a mix of regular income and capital appreciation –these invest in a mix of equity and debt instruments,[object Object]

TYPES OF Mutual funds – by investment objectives,[object Object],Money market /liquid schemes –these provide easy liquidity, preservation of capital and moderate income – they invest in safe short instruments such as treasury bills, inter bank call money, commercial paper etc – they give returns of about 5-8% per year,[object Object],Gilt funds – they invest in govt securities only and have no default risk –they return about 3-5% p.a.,[object Object]

TYPES OF Mutual funds – other classifications,[object Object],Index funds -they replicate specific indices – like BSE sensex. They invest in securities in the same weightage as the index,[object Object],Tax saving schemes – these schemes give tax rebates under specific provisions of IT act eg Equity linked tax saving scheme, Pension schemes etc – these are growth oriented and predominantly invest in equities,[object Object]

TYPES OF Mutual funds – other classifications,[object Object],Commodity funds – there are funds today that invest in Gold as a commodity and closely mirror the rate of gold.,[object Object],Real estate funds –Real estate funds are those that invest their corpus in real estate projects and provide returns to investors based on appreciation of the asset over a period of 5-8 years. There are also few real estate funds that provide regular quarterly returns based on leasing out of the real estate properties,[object Object]

TYPES OF Mutual funds – other classifications,[object Object],Load funds and No load funds – load funds charge an entry and exit fee –the No load funds do not charge any entry and exit fees,[object Object]

TYPES OF EQUITY FUNDS,[object Object],AGGRESSIVE GROWTH FUNDS:Investment in less researched or speculative/non-blue chip stocks,[object Object],GROWTH FUNDS: Investment in stocks with above average growth prospects over 3-5 years.Ex:Tech Stock,[object Object],SPECIALITY FUNDS: Sector, Offshore, Small-cap equity, Option income funds,[object Object],DIVERSIFIED EQUITY FUNDS: ELSS. ,[object Object],EQUITY INDEX FUNDS,[object Object],VALUE FUNDS: Invest in fundamentally sound companies with low P/E ratio.,[object Object],EQUITY INCOME FUND: Invest in sectors where low fluctuation in stock price and high dividend is expected.,[object Object]

Ground rules for investing,[object Object],Have a long term investment plan – early in life, you can have a higher exposure to equities or equity based MF’s ,[object Object],Keep a small amount liquid /debt funds for contingencies or planned expenses over 2/3 years,[object Object], Spend time in educating yourself in investment areas,[object Object],Ignore hot tips, hot stocks etc,[object Object],Start early,[object Object],Invest regularly –look at Systematic investment plans offered by Mutual funds,[object Object],Buy and hold,[object Object]

What to look for before investing in a MF,[object Object],Compare the performance between the same types of funds,[object Object],Risk assesment - most of the well known funds are rated - Value research ratings and Money control.com’s ratings are fairly comprehensive,[object Object],Go with funds that have a large corpus of funds – these are mostly safer than the ones with low corpus,[object Object],Management - look at the fund manager’s record and go with fund managers who have a good past performance record,[object Object]

Build Wealth through Systematic Investment Plan,[object Object]

A Systematic Investment Plan (SIP) is an option that allows you to invest a fixed sum at periodic intervals on specific dates.,[object Object],A Systematic Investment Plan works for you in three ways:-,[object Object],It helps you to save regularly and thus inculcates a sense of discipline ,[object Object],It harnesses the power of compounding ,[object Object],It is the best possible way you to reign in impulsive buys-and-sells that otherwise one is gripped by in times of market volatility. - Rupee cost averaging ,[object Object],You are free to choose any amount (minimum Rs 500 and in multiples of Re 1/-) and any date as per your convenience.,[object Object]

OFFER DOCUMENT,[object Object]

Offer Document (OD),[object Object],A legal document ,[object Object],issued by AMC or Sponsor,[object Object],OD describes the product,[object Object],Very important document from the perspective of prospective investor,[object Object],Primary vehicle for investment decision,[object Object]

Contents of theOffer Document,[object Object],Summary information,[object Object],Definitions,[object Object],Risk Factors,[object Object],Legal and Regulatory Compliance,[object Object],Financial Information,[object Object],Constitution of the Mutual Fund,[object Object],Investment objectives and policies,[object Object],Management of the Fund,[object Object],Offer Related information,[object Object]

Who can invest in MF’s in India,[object Object]

Residents : Resident Individuals, Indian Companies, Indian Trusts/ Charitable Institutions, Banks / NBFCs, Insurance Companies, Provident funds,[object Object],Non Residents : NRIs,[object Object], Foreign Entities: FIIs registered with SEBI,[object Object]

Accounting and NAV calculation,[object Object]

Net Asset Value (NAV),[object Object],Investors’ subscriptions are not accounted as liabilities or deposits but as Unit Capital,[object Object],Investments made on behalf of the investors are reflected on the assets side.,[object Object],Liabilities also form part of the balance sheet,[object Object],NAV is asset minus liabilities and divided by total number of outstanding units.,[object Object],AV = Assets - Liabilities,[object Object],NAV = Net assets value of the scheme /Number of units outstanding,[object Object], Market value of investments + receivables + accrued income + other assets -accrued expenses-payables- liabilities,[object Object],No.of units outstanding on NAV date,[object Object]

Daily NAV for open-end schemes ,[object Object],Weekly NAV for close-end schemes,[object Object],A fund’s NAV is affected by,[object Object],Purchase and sale of investment securities,[object Object],Valuation of all investment securities held,[object Object],Other assets and liabilities,[object Object],Units sold or redeemed,[object Object],Valuation of investment securities must be at their market prices.,[object Object]

Legal and Regulatory Environment,[object Object]

Organization of a Mutual Fund,[object Object]

LEGAL STRUCTURE ,[object Object],IN INDIA ,[object Object],ISSUE OF OPEN AND CLOSE END FUNDS IN SAME LEGAL STRUCTURE,[object Object],FOLLOW THE SEBI REGULATION,[object Object],TRUST FORM ,[object Object],SPONSOR: ESTABLISHES THE MUTUAL FUND,[object Object],Must contribute 40% of the net worth of the AMC,[object Object],Need to have sound financial track record,[object Object],Appoint trustees ,[object Object]

Regulators in India,[object Object],SEBI,[object Object],SEBI regulates MFs,[object Object],All MFs have to be registered with SEBI,[object Object],RBI,[object Object],Bank-owned MFs are under RBI and SEBI,[object Object],Ownership of AMC by the bank,[object Object],Guarantees issued by the bank as sponsor,[object Object],Permission to access inter-bank call money market,[object Object]

AMFI,[object Object],Promote the interests of the mutual funds and unit-holders,[object Object],Set ethical, commercial, and professional standards in the industry,[object Object],Increase the public awareness of MF industry,[object Object]

Investors Obligations / Complaint Redressal,[object Object],Investors should:,[object Object],Read Offer Document,[object Object],Understand Risk factors,[object Object],Monitor Investments,[object Object],Ask for information required ,[object Object],“Monitoring is entirely your responsibility”,[object Object],SEBI intervention ,[object Object],For issue of due diligence certificate for new scheme by compliance officer,[object Object],Companies Act cannot protect investors as fund investors are neither shareholders in the AMC nor depositors,[object Object]

Wealth management session 2

Wealth management session 2

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Wealth management session 2