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MUTUAL

FUNDS
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.
TYPE OF
SCHEMES
Different type of schemes are available in the
market broadly, they can be classified as:

EQUITY SCHEMES : In this scheme money is invested


in the equity. Sector funds are type of equity
schemes in this scheme money is invested in
identified sectors.

DEBT SCHEMES : In this scheme money is invested


in debt .According to the nature of debt , scheme
can be further classified as glit and liquid or
diversified debt fund .

BALANCED SCHEMES : Here money is invested in mix


of debt or equity.
RISK

qNo Guarantees: No investment is risk free. If the entire


stock market declines in value, the value of mutual fund
shares will go down as well, no matter how balanced the
portfolio. Investors encounter fewer risks when they invest in
mutual funds than when they buy and sell stocks on their
own. However, anyone who invests through a mutual fund
runs the risk of losing money

q
qManagement risk: When you invest in a mutual
fund, you depend on the fund's manager to make the
right decisions regarding the fund's portfolio. If the
manager does not perform as well as you had hoped,
you might not make as much money on your
investment as you expected.
TAX
BENEFIT

qSince, April 1, 2003, all dividends, declared by debt-oriented


mutual funds (i.e. mutual funds with less than 50% of assets in
equities), are tax-free in the hands of the investor.

NO ESCAPE FROM TAX EVEN AFTER REINVESTMENT

qIf your fund makes a profit on its sales, you will pay taxes on
the income you receive, even if you reinvest the money you
made.
LIQUIDITY

The investment in Mutual Fund is highly liquid


but it may not satisfy the degree of liquidity.
Small Savings scheme

• Small savings schemes are offered to investors who are willing
to invest small amounts of money for varied period of times.

• These schemes are usually offered by government backed
organizations, and are designed to provide safe and
attractive investment options .


Investment options available for SSS .

 -Public Provident Fund


-Employees' Provident Fund
- National Savings Certificate -Kisan
Vikas Patra
-National Savings Scheme, 1992 -Relief
Bonds
Characteristic
s

• Safety for your invested money

• Government Backing

• Small Investor Friendly

• Tax benefits

• Liquidity

• Risk free investment

• Nomination facility

 Risk in Investing

 - You may be charged for pre-mature withdrawal


of your invested money .

 - All schemes do not offer transfer from one


office/city to other .

- It is not easy to get the money from


government offices, even after maturity of your


investments .


Tax Benefits

- For people with high taxable incomes, the tax benefits offered
by these schemes are very attractive.
-
- Maximum limit for the Tax benefits is 1 lakh pa .
- Most of the schemes are exempted under 80C of Income Tax Act
.
Liquidity

 - Access to your investments is very easy , Most of the


schemes provide for premature withdrawals .

 - A few of the schemes also offer loans based on the investment


made .
-
INSURANCE
MEANING :
Insurance is a contractual arrangement whereby one party
agrees to compensate another for losses in return for the
payment of a consideration.
The party agreeing to pay for the losses is insurer.
And the party whose loss is compensated is insured. For
claiming the insurance the insured have make payment to
the insurer which is called as premium.

How insurance works?

Insurance works on the concept of sharing. In very simple


words insurance is a pooling arrangement whereby
contribution are collected from all members who join the
pool the amount collected is used to utilized to
compensate the members who suffer from loss.
TAX
BENEFIT
qFrom 2005 – 06 Investment up to 1 lack in life
insurance is exempt or we can say that the amount
of insurance is deducted from the taxable income.

qIn case of health insurance plan an amount up to


Rs 10000 of premium paid was eligible for
deduction from the taxable income.

qEarlier individuals with taxable income in excess


of Rs 5 lacks where not eligible for any tax
relief but from 2005 – 06 they are also benefited
with deduction of Rs 1 lack.
RISK
qThere is no risk involve in investment in
insurance, claim will be pain whenever it appears .

qThe risk lies in the return on investment i.e.


bonus received from the insurer the bonus may
fluctuate as it depends on where the investment is
made by the insurer. It is not as safe as
investment in banks.
LIQUIDITY

Liquidity is less or we can say that there is no


liquidity in in insurance.

TRANSFERABILITY

The investment can be transferred to the


nominees or to the legal hairs depending on the
situation.
Company Fixed Deposit
• The concept of company fixed deposits was started in india
in 1964 by Bajaj Capital Ltd.

• Company Fixed Deposit is the deposit placed by investors
with companies for a fixed term carrying a prescribed
rate of interest.

• Fixed Deposits in companies earn a fixed rate of return
over a period of time .

• It basically grew out of the need of Corporate Sector for
raising short term finance and requirements of small
investors to earn superior returns as compared to returns
offered by the Banks.
 Characteristics


• Assured returns

• Premature encashments

• Non transferable

• Nomination facility

• Less Risk

• Safest option for short term investment


Tax benefits


• No Income Tax is deducted at source if the interest income
is up to Rs 5,000 in one financial year .

• No other tax benefits .

 Liquidity
• Liquidity is very high in Company deposits .

• Investor can easily withdraw his deposits whenever he
wants , in that case companies are authorized to deduct
some money from deposits

• Company deposits are also use as a guarantee in case of
bank loans .