Professional Documents
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Mutual Fund
Mutual Fund
Presented By:
Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun
90), Bank of Baroda Mutual Fund (Oct 92
Cont.
Third Phase 1993-2003 (Entry of Private Sector Funds) Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 crores. Fourth Phase since February 2003 -In February 2003,
Cont
One is the Specified Undertaking of the Unit Trust of India with
2. Schemes according to Investment Objective: Growth / Equity Oriented Scheme Income / Debt Oriented Scheme Balanced Fund Money Market or Liquid Fund Gilt Fund Index Funds Sector specific funds/schemes Tax Saving Schemes
A Load Fund is one that charges a percentage of NAV for entry or exit. That is, each time one buys or sells units in the fund, a charge will be payable. This charge is used by the mutual fund for marketing and distribution expenses. Suppose the NAV per unit is Rs.10. If the entry as well as exit load charged is 1%, then the investors who buy would be required to pay Rs.10.10 The investors should take the loads into consideration while making investment as these affect their yields/returns. A no-load fund is one that does not charge for entry or exit. It means the investors can enter the fund/scheme at NAV and no additional charges are payable on purchase or sale of units.
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
OBJECTIVES OF AMFI
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.
Cont.
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.
Diversification
We must spread our investment across different securities (stocks, bonds, money market instruments, real estate, fixed deposits etc.) and different sectors (auto, textile, information technology etc.).
Variety
Mutual funds offer a tremendous variety of schemes.
Professional Management
Qualified investment professionals who seek to maximize returns and minimize risk monitor investor's money.
Transparency
Being under a regulatory framework, mutual funds have to disclose their holdings, investment pattern and all the information that can be considered as material, before all investors. SEBI acts as a watchdog and safeguards investors interests Liquidity
A distinct advantage of a mutual fund over other investments is that there is always a market for its unit/ shares. It's easy to get ones money out of a mutual fund. Redemptions can be made by filling a form attached with the account statement of an investor.
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.
Section 2(42A):
Under Section 2(42A) of the Act, a unit of a mutual fund is treated as short-term capital asset if the same is held for less than 12 months. Section 10(38): Under Section 10(38) of the Act, long term capital gains arising from transfer of a unit of mutual fund is exempt from tax if the said transaction is undertaken after October 1, 2004 and the securities transaction tax is paid to the appropriate authority. Short-term capital gains on equityoriented funds are chargeable to tax @10%, Long-term capital gains on debt-oriented funds are subject to tax @20% of capital gain after allowing indexation benefit or at 10% flat without indexation benefit, whichever is less.
Section 112: Under Section 112 of the Act, capital gains, not covered by the exemption under Section 10(38), chargeable on transfer of long-term capital assets are subject to following rates of tax: Resident Individual & HUF -- 20% plus surcharge, education cess. Partnership firms & Indian companies -- 20% plus surcharge. Foreign companies -- 20% (no surcharge). Capital gains will be computed after taking into account the cost of acquisition as adjusted by Cost Inflation Index, notified by the central government.
Product Focus
The performance of the fund in giving returns to its investors. The way in which that particular fund was marketed. Customer Ownership Focus Specialized Product & Service Focus
Marketing Strategies:
Direct marketing Personal Selling Telemarketing Direct mail Advertisements in newspapers and magazines Hoardings and Banners Internet Selling through intermediaries Joint Calls
Getting feedback about sales; Studying performance indicators about fund performance like NAV; Sending certificates in time and other after sales activities; Honoring the commitments made for redemptions and repurchase; Paying dividends and other entitlements; Creating positive image about the fund; Spreading awareness about mutual funds; Creating new markets for mutual funds.
and ideally it should not be more than 90 and less than 80.