Mutual Funds

What, Why and How

What is a Mutual Fund?

A mutual fund pools the money of people with similar investment goals.

Graphically speaking...

Step 1 : Make investments

MF

Step 5: Returns provided to investors

Investor community
Step 4: Expenses deducted from the returns

Earnings to the Fund House/ Distributor

Various Assets

Where is the money invested

Your money is invested in various securities depending on the objectives of the scheme you choose.
stocks bonds money market

Why invest in a mutual fund?..(1)

Professional Management Diversification Liquidity & Convenience Very little paperwork Tax Efficiency

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 at which you bought Income Distribution: The fund passes on the profits it has earned in the form of dividends

What are the types of mutual funds ..(1)

Open end schemes: You can invest or redeem in these schemes at any time Closed end schemes: You can invest during the initial issue period and your money is locked in for a stipulated period (ranging from 2 to 15 years)

What are the types of mutual funds ..(2)

Based on the investment objective Growth schemes Income schemes Balanced / Hybrid schemes Money market schemes

What are the types of mutual funds ..(3)

Types of growth funds Diversified Funds Sector Funds Index Funds

What are the types of mutual funds ..(4)

Types of income schemes: Diversified debt funds Gilt funds Income funds with marginal equity

Other types of schemes

Need based schemes Tax-Saving schemes
Equity Linked Savings Schemes Pension Schemes

Future needs schemes

Childrens Savings Plans Retirement benefit schemes

The risk return trade-off..

Investment horizon

Sector funds Growth Funds

Index, Active diversified

Balanced Funds
Ratio of Debt : Equity

Debt Funds
Liquid Fund

Risk

Investment Pyramid
Investor Portfolio Composition Capital Growth
Risk: Medium to High Period: 3 to 5 years
Stocks Growth Funds

Income
Risk: Medium to Low Period: 1 to 3 years Capital Preservation Risk: Low to Medium Period: Less than 1 year

Bonds Debentures Income/Bond Funds Company Fixed Deposits Money Market Funds Short-term Deposits /Government Paper

How to choose the right scheme

Determine your financial goals and your time horizon Determine your tolerance for risk Study the objectives of the funds available and match them with your need

How to choose the right fund house

Look for: Professional management Performance track record Quality of service Choice of schemes

How to make the winning mutual fund investment(1)

Start Early Save regularly Use a portfolio approach spread your investments across sectors and asset classes See that your portfolio contains both short term and long term investments

How to make the winning mutual fund investment(2)

Monitor your investment portfolio periodically in light of market changes and changes in your life Stay calm, steady and disciplined keep your goals firmly in sight do not get carried away by emotions or temporary market fluctuations

Some typical investor classes

Retail non-retired individuals Retired individuals High Net worth Individuals Corporate investors Provident / Super annuation / Gratuity Funds NRIs

Context of Investing

PROFESSION

INVESTMENTS

INCOME
CURRENT EXPENDITURE FUTURE EXPENDITURE SAVINGS

Why should one regularly invest?

When chasing a financial goal, the simplest form of planning is to invest regularly Most of us calculate our earnings, expenses and savings monthly. The easiest way to plan our investments, therefore, is on a monthly basis

Why don't most people save regularly?

1. Lack of awareness/ concern/ planning for financial goals 2. No money left after monthly expenses 3. Hassle of keeping track of investments 4. Unaware of power of compounding

The Simple Solution

An SIP with Franklin Templeton Funds

1. Convenient 2. Affordable 3. Widest choice of top performing funds

Thank You