3. 1. Real Estate (e.g. Residential, Land & Commercial)
2. Commodities (e.g. Gold, Silver, Gold Fund, ETF)
3. Fixed Income (e.g. FD, Bond, Debentures, Insurance Policies)
4. Equity (e.g. Shares of Listed Companies)
5. Mutual Funds (e.g. Mid cap, Small cap, Blue chip, Balance
fund, ELSS)
4. Apart from Liquidity Risk, Credit Risk, Market
Risk and Price Risk, Interest rate Risk there is
one most ignorant risk is “inflation Risk”
What is Inflation Risk???
Inflation or Price inflation is the general rise in
the prices of various commodities , products,
and services that we consume. Inflation erodes
the purchasing power of the money.
To be continued……..to next slide.
6. If Inflation risk is not properly accounted for in the
investment plan, one may fall short of target when the need
arises.
In this context, It is pertinent to take a look at whether the
investment are able to protect purchasing power or not.
In order to protect the purchasing power, the investment
return should be at least as much as inflation. If the same is
higher than the inflation, the purchasing power increases
whereas if one earns lower returns that inflation, the
purchasing power drops.
If investment returns are higher than inflation, the investor
is earning positive real rate, and vice versa.
7. The risk profilers try to ascertain the risk appetite of the investor
so that one does not sell mutual fund schemes that carry higher
risk than what the investor can handle. In order to ascertain the
risk appetite, the following must be evaluated:
1. The need to take risks
2. The ability to take risks
3. The willingness to take risks
- Out of the above, the need to take risk arises when the investor
needs higher returns to reach one’s goals. The ability to take risk
refers to the financial ability, and the investment horizon, whereas
the willingness is linked to the psychological capacity to handle
risk.
8. One option is to manage the investments oneself. That would
involve finding the right investments and carrying out the related
research and administration work. The other option is to
outsource the entire job to a professional or a company engaged in
such a business.
Mutual fund is that second option – it is managed by a team of
professionals, known as the asset management company. This is
what really needs to be understood. By choosing to invest through
mutual funds, one is not investing in alternative investment
options, but only changing the way of investing money. The entire
job of investing is outsourced to a professional firm.
So, the next logical question is: “which of the two choices is better
– investing oneself or taking professional help to manage my
investments?”
To be continued…
9. This question should be broken down into three components:
1. Can one do the job oneself?
2. Does one want to do it?
Can one do the job oneself?
This is the question about ability. In order to do a good job, there
are a few requirements, viz., ability to do the job and the
availability of time required for the same. There are tasks where
one may not have the skills and knowledge, e.g. a history teacher
may not be able to help her daughter to study Mathematics in the
higher classes. At the same time, one may not have enough time
required for the job.
To be continued…
10. In either case, one is unable to do manage money oneself and
should consider outsourcing it.
Does one want to do it?
Even when one has the required skills and knowledge to manage
one’s money, it is very likely that one may not enjoy money
management–either the research and analysis or administration or
accounting. At the same time, one may want to spend time on
one’s main profession or on certain other activities, e.g. spending
time with family and friends, pursuing hobbies, etc. That also
means that one needs help in managing investments.
11.
12. Mutual fund is a vehicle (in the form of a “trust”) to mobilize money
from investors, to invest in different markets and securities, in line
with stated investment objectives. In other words, through investment
in a mutual fund, an investor can get access to equities, bonds, money
market instruments and/or other securities, that may otherwise be
unavailable to them and avail of the professional fund management
services offered by an asset management company.
Role of Mutual Funds –
The primary role of mutual funds is to help investors in earning an
income or building their wealth, by investing in the opportunities
available in securities markets. It is possible for mutual funds to
structure a scheme for different kinds of investment objectives.
As a large investor, the mutual funds can keep a check on the
operations of the investee company, and their corporate governance
and ethical standards.
13. Mutual funds seek to mobilize money from all possible investors. Various investors
have different investment preferences and needs. In order to accommodate these
preferences, mutual funds mobilize different pools of money. Each such pool of
money is called a mutual fund scheme. Every scheme has a pre-announced
investment objective. Investors invest in a mutual fund scheme whose investment
objective reflects their own needs and preference.
Examples of Investment Objectives
Investment Objectives Type of mutual fund
scheme
The scheme intends to provide reasonable income along with high
liquidity by investing in overnight securities having maturity of one
business day.
Overnight fund
To generate capital appreciation/income from a portfolio,
predominantly invested in equity and equity related instruments
Equity fund
The primary objective of the scheme is to generate long term capital
appreciation by investing predominantly in equity and equity related
securities of companies across the market capitalization spectrum. The
fund also invests in debt and money market instruments with a view to
generate regular income.
Hybrid fund
The primary objective of the scheme is to generate a steady stream of
income through investment in fixed income securities.
Long Duration fund
14. Units -
The investment that an investor makes in a scheme is translated into a certain
number of ‘Units’ in the scheme. Thus, an investor in a scheme is issued units of
the scheme.
Face Value
Typically, every unit has a face value of Rs. 10. The face value is relevant from an
accounting perspective.
Unit Capital
The number of units issued by a scheme multiplied by its face value (Rs. 10) is the
capital of the scheme–its Unit Capital
Recurring Expenses
The fees or commissions paid to various mutual fund constituents come out of the
expenses charged to the mutual fund scheme. These are known as recurring
expenses. These expenses are charged as a percentage to the scheme’s assets under
management (AUM). The scheme expenses are deducted while calculating the
NAV. This means that higher the expenses, lower the NAV, and hence lower the
investor returns. Given this, SEBI has imposed strict limits on how much expenses
could be charged to the scheme. For running the scheme of mutual funds,
operating expenses are also incurred.
To be continued….
15. Net Asset Value
The true worth of a unit of the mutual fund scheme is otherwise called
Net Asset Value (NAV) of the scheme. When the investment activity is
profitable, the true worth of a unit increases. When there are losses, the
true worth of a unit decreases. The NAV is also the net realizable value
per unit in case the scheme is to be liquidated–how much money could be
generated if all the holdings of the scheme are sold and converted into
cash.
Assets Under Management
The sum of all investments made by investors’ in the mutual fund scheme
is the entire mutual fund scheme’s size, which is also known as the
scheme’s Assets Under Management (AUM). This can also be obtained by
multiplying the current NAV with the total units outstanding. The
relative size of mutual fund companies/asset management companies is
assessed by their assets under management (AUM). When a scheme is
first launched, assets under management is the amount mobilized from
investors. Thereafter, if the scheme has a positive profitability metric, its
AUM goes up; a negative profitability metric will pull it down.
16. Professional Management - Mutual funds offer investors the opportunity to earn
an income or build their wealth through professional management of their
investible funds. There are several aspects to such professional management viz.
investing in line with the investment objective, investing based on adequate
research, and ensuring that prudent investment processes are followed. Investing
in the securities markets will require the investor to open and manage multiple
accounts and relationships such as broking account, demat account and others.
Mutual fund investment simplifies the process of investing and holding securities.
The fund management function is not restricted to research and selection of
securities to construct a portfolio of investments, but also to take care of various
administrative tasks like collection of corporate benefits (for example: interest
payments, dividends, rights issues, buybacks, etc.), or follow up on the same. The
calculation and publishing of NAV on a daily basis means that the accounting of
the entire portfolio is done on a daily basis. The investor managing one’s portfolio
independently would need to take too much efforts to take care of this part. All
these benefits come at a very low cost and is available even for the smallest
investments. Further, the expenses charged for professional management of funds
are quite reasonable.
17. Affordable Portfolio Diversification - Investing in the units of a scheme provide
investors the exposure to a range of securities held in the investment portfolio of the
scheme in proportion to their holding in the scheme. Thus, an investor can get
proportionate ownership in a diversified investment portfolio even for a small
investment of Rs. 500 in a mutual fund scheme. With diversification, an investor ensures
that “all the eggs are not in the same basket”. Consequently, the investor is less likely to
lose money on all the investments at the same time. Thus, diversification helps reduce
the risk in investment.
Economies of Scale - Pooling of large sum of money from many investors makes it
possible for the mutual fund to engage professional managers for managing
investments. Individual investors with small amounts to invest cannot, by themselves,
afford to engage such professional management.
Transparency - An investor is well served if relevant information is available on time.
Availability of such information is critical for taking informed investment decision. The
structure of the mutual funds and the regulations by SEBI have ensured that investors
get such transparency about their investments.
Liquidity - At times, investors in financial markets are stuck with a security for which
they can’t find a buyer–worse, at times they can’t find the company they invested in.
Such investments, whose value the investor cannot easily realize in the market, are
technically called illiquid investments and may result in losses for the investor.
18. Investment Comfort - Once an investment is made with a mutual fund, they make
it convenient for the investor to make further purchases with very little
documentation. This simplifies subsequent investment activity.
Regulatory Comfort - The regulator, Securities and Exchange Board of India
(SEBI), has mandated strict checks and balances in the structure of mutual funds
and their activities. Mutual fund investors benefit from such protection.
Systematic Approach to Investments - Mutual funds also offer facilities that help
investors invest amounts regularly through a Systematic Investment Plan (SIP); or
withdraw amounts regularly through a Systematic Withdrawal Plan (SWP); or
move money between different kinds of schemes through a Systematic Transfer
Plan (STP). Such systematic approaches promote investment discipline, which is
useful in long-term wealth creation and protection.
19. - Growth Funds
- Income Funds
- Liquid Funds
- By structure of the Fund
1. Open Ended Funds
2. Closed Ended Funds
3. Interval Funds
- By the management of the portfolio
1. Actively managed funds
2. Passive Funds
- By the investment universe
1. Equity Funds (Large cap funds, Mid cap and Small cap)
2. Fixed Income Funds
3. Money market funds
4. Gold fund and International funds.
20. Assets Under Management (AUM) of Indian Mutual Fund
Industry as on March 31, 2022 stood at ₹37,56,683 crore
[Source – AMFI]
The MF Industry’s AUM has grown from ₹ 17,55,000 crore
as on March 31, 2017 to ₹37,56,683 crore as on March 31,
2022, more than 2 fold increase in a span of 5 years. [Source
– AMFI]
The total number of accounts (or folios as per mutual
fund parlance) as on March 31, 2022 stood at 12.95
crore (129.5 million), while the number of folios under
Equity, Hybrid and Solution Oriented Schemes,
wherein the maximum investment is from retail
segment stood at about 10.34 crore (103.4 million).
21. 1. Axis Mutual Fund
2. Aditya Birla Mutual Fund
3. Canara Robeco Mutual Fund
4. DSP Mutual Fund
5. Edelweiss Mutual Fund
6. Franklin Templeton Mutual Fund
7. HDFC Mutual Fund
8. ICICI Prudential Mutual Fund
9. IDBI Mutual Fund
10. IDFC Mutual Fund
11. Indiabulls Mutual Fund
12. Kotak Mutual Fund
13. LIC Mutual Fund
14. Mirae Mutual Fund
15.Nippon Mutual Fund
16.Motilal Oswal Mutual Fund
17.Quantum Mutual Fund
18. SBI Mutual Fund
19. Tata Mutual Fund
20. UTI Mutual Fund
21. Invesco Mutual Fund
22. BNP Mutual Fund
23. PGIM Mutual Fund
22. Fund Size – 16,517 crore
Period
Invested
for
₹10000
Invested
on
Latest
Value
Absolute
Returns
Annualis
ed
Returns
Category
Avg
Rank
within
Category
1 Week 01-Apr-22 10179.70 1.80% - 1.69% 26/27
1 Month 08-Mar-22 10954.10 9.54% - 10.88% 26/27
3 Month 07-Jan-22 9633.20 -3.67% - -2.26% 20/27
6 Month 08-Oct-21 9659.00 -3.41% - -1.94% 21/27
YTD 31-Dec-21 9788.60 -2.11% - -0.44% 20/27
1 Year 08-Apr-21 12376.30 23.76% 23.76% 24.68% 18/26
2 Year 08-Apr-20 20224.30 102.24% 42.21% 52.66% 24/25
3 Year 08-Apr-19 18970.40 89.70% 23.77% 21.57% 8/23
5 Year 07-Apr-17 24575.10 145.75% 19.68% 14.41% 2/22
10 Year 04-Apr-12 63228.80 532.29% 20.22% 18.54% 4/19
Since
Inception
18-Feb-11 68540.00 585.40% 18.86% 18.02% 9/27
23. Fund Size – Rs. 8268 Crore
Period
Invested
for
₹10000
Invested
on
Latest
Value
Absolute
Returns
Annualise
d Returns
Category
Avg
Rank
within
Category
1 Week 01-Apr-22 10166.40 1.66% - 1.88% 33/38
1 Month 08-Mar-22 11018.90 10.19% - 11.28% 33/38
3 Month 07-Jan-22 10022.30 0.22% - -1.35% 13/38
6 Month 08-Oct-21 10289.40 2.89% - 1.77% 19/38
YTD 31-Dec-21 10127.10 1.27% - 0.31% 20/38
1 Year 08-Apr-21 13897.10 38.97% 38.97% 40.40% 24/37
2 Year 08-Apr-20 25627.00 156.27% 60.08% 69.33% 33/36
3 Year 08-Apr-19 22697.40 126.97% 31.39% 25.21% 5/34
5 Year 07-Apr-17 25997.50 159.97% 21.03% 15.37% 2/16
Since
Inception
29-Nov-13 62940.00 529.40% 24.61% 18.72% 8/38
