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MUTUAL FUND

BYGROUP E

Introduction
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 realised are shared by its unit holders in proportion to the number of units owned by them.

Mutual Fund Operation Flow Chart

Organization of Mutual Fund


Mutual fund

Sponsor
Trustee Asset Management Company (AMC) Transfer Agent Custodian

History
First phase 1964-87 (Establishment of UTI).

Second phase 1987-93 (Entry of public sector

funds). Third phase 1993-2003 (Entry of a private sector funds). Fourth phase since feb.2003 (Bifurcated of UTI).

ADVANTAGE OF MUTUAL FUNDS


PROFESSIONAL MANAGEMENT

DIVERSIFICATION
OFFERING WIDE PORTFOLIO INVESTMENT PROVIDING BETTER YEILDS SUPPORTING CAPITAL MARKET PROMOTING INDUSTRIAL DEVELOPMENT RENDERING EXPERTISE INVESTMENT

SERVICE AT LOW COST OFFERING TAX BENEFITS

Bottlenecks of Mutual Funds


No Guarantees

Fees and commissions


Taxes Management risk Costs Dilution

Risk Hierarchy of Mutual Funds


Equity Incom e Fund Balanc ed Fund

Risk Level

Gilt Fund Money Market Fund

INVESTMENT IN MUTUAL FUNDS


Aggressive Plan
Growth Schemes 60 70% Balanced Scheme 10 -20% Income Scheme 10 15% Money Market Scheme 5%

This plan may suit: 1. Investors in their prime earning years and willing to take more risk. 2. Investors seeking growth over a long-term.

INVESTMENT IN MUTUAL FUNDS


Conservative Plan
Growth Schemes 60 70% Balanced Scheme 10 -20% Income Scheme 10 15% Money Market Scheme 5%

This plan may suit: Retired and other investors who need to preserve capital and earn regular income

Players of Mutual Fund


SEBI

Asset Management Company


Intermediaries

FREQUENTLY USED TERMS


Net Asset Value (NAV)

Sale Price
Repurchase Price Redemption Price Sales Load Repurchase or Back-end Load

TYPES OF MUTUAL FUND SCHEMES


Mutual Fund ON THE BASIS OF EXECUTION & OPERATION ON THE BASIS OF YEILD & INVESTMENT PATTERN Tax Saving Fund

Growth fund
Open Ended Fund Close Ended Fund
Money Market Mutual Fund

Balanced Fund Specialized Fund

Income fund

Types of Risk in Mutual Fund


Call Risk Country Risk Credit Risk Currency Risk Income Risk

Industry Risk
Inflation Risk Interest Rate Risk Manager Risk Market Risk Principal Risk

Types of Returns from a Mutual Fund


Capital

Dividend Distribution

DISTRIBUTION CHANNELS IN THE MUTUAL FUND INDUSTRY


The Direct Channels

The banking channel


The retail channel The corporate channel Individual Financial Advisors (IFA) or Agents

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