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Title: Introduction to Mutual Funds
Description: A mutual fund is an open-end professionally managed investment fund that pools money from many investors to purchase securities. Mutual funds are "the largest proportion of equity of U.S. corporations."
Description: A mutual fund is an open-end professionally managed investment fund that pools money from many investors to purchase securities. Mutual funds are "the largest proportion of equity of U.S. corporations."
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INTRODUCTION TO
MUTUAL FUNDS
By: Jerome M
...
Investments are held in a trust of which the
investors alone are the joint beneficial owners
...
4
Structure of Mutual Fund
5
What is an Asset Management Company (AMC)?
• Investment manager of the mutual fund
...
• Trustees and AMC enter into an investment management agreement
...
50 lakh in
all open-ended schemes
...
50 crore at all times
...
• AMC of one mutual fund cannot be an AMC or trustee of another fund
...
Invested according to
pre-specified
investment objectives
...
There is thus mutuality
in the contribution and
the benefit
...
7
Classification of Mutual Funds
Classification of Mutual Funds
Based on Structure
Based on Investment
Objective
Based on
Investment Style
Open Ended
Funds
Debt Funds
Passive Funds
Closed Ended
Funds
Equity Funds
Active Funds
Interval Funds
Hybrid Funds
8
Classification - Based on Structure
Open Ended
Funds
Closed
Ended Funds
Interval
Funds
•
•
•
•
No fixed maturity date
...
Transactions are NAV-based
...
• Run for a specific period
...
• Unit capital is kept constant
...
• Becomes open-ended at specific intervals
...
9
Classification - Based on Investment Objective
Debt
Funds
• Invest in short and long term debt instruments
...
Equity
Funds
• Invest in equity securities
...
Hybrid
Funds
• Invest in a combination of equity and debt securities
...
• Aim to provide for both income and capital
appreciation
...
• Invest in same securities and in same proportion as that of
index
...
• Expenses are lower
...
Active
Funds
• Invests in securities and sectors that may offer a better return
than the index
...
• May perform better or worse than the market index
...
11
Categorization of Mutual Fund Schemes
Categorization of open-end mutual funds:
- To ensure uniformity in characteristics of similar type of schemes launched by
different mutual funds
...
Hybrid
Schemes
Debt
Schemes
Equity
Schemes
Solution oriented
Schemes
Categorization of
Mutual Fund
Schemes
Other
Schemes
12
How to invest in Mutual Funds?
Via Physical Mutual
Fund Application
Form
Via Online Mode
(Website of Mutual
Fund)
Via Mobile App of
Mutual Fund
Via AMFI Registered
Mutual Fund
Distributor (using
physical form/ online/
mobile app)
13
Centralized KYC (C-KYC) in Securities Market
KYC registration is centralized through KYC Registration
Agencies (KRAs) registered with SEBI
...
Standard Account Opening form (AOF) has 2 parts:
- Part I : Basic and uniform KYC details of the investor
- Part II : Additional KYC information as may be sought
separately by the Mutual Fund
14
Mutual Funds investment procedure
Indicate whether you are a First Time Investor/ Existing Investor
...
You must submit this KYC status
...
Submit Bank account details and copy of “Cancelled Cheque”
...
15
Investment Modes in Mutual Funds
Lump-sum
Investment
• One time investment
...
• Investor faces risk of volatility in markets
...
Period of commitment - 6 months, 1 / 3 / 5 years
...
Made on specific dates e
...
1st, 5th, 10th, 15th of
every month
...
• No involvement of third party
agents
–
brokers
or
distributors
...
• Have low Expense ratio
(because of no commissions)
...
• Return is higher due to a lower
expense ratio
• Bought
through
an
intermediary
...
• Commissions and brokerage
paid
...
• Low NAV
...
• Realized profit/loss is treated as capital gains or loss
...
Dividend
Payout
Option
• Fund declares dividend from realized profits
...
• NAV falls after dividend payout to the extent of dividend paid
...
• Number of units standing to the credit of the investor,
increases each time a dividend is declared, and reinvested
back into the scheme
...
• Contains financial information of mutual fund
...
• Other additional information
...
Investment objective
...
Investment strategies
...
Fees and expenses
...
19
Risk-o-Meter and its importance
Six levels of risk for mutual fund
schemes:
i
...
Low to Moderate Risk
iii
...
Moderately High Risk
v
...
Very High Risk
Importance of Risk-o-meter :
- Helps align risk that a fund carries with
the risk profile of the investor
Title: Introduction to Mutual Funds
Description: A mutual fund is an open-end professionally managed investment fund that pools money from many investors to purchase securities. Mutual funds are "the largest proportion of equity of U.S. corporations."
Description: A mutual fund is an open-end professionally managed investment fund that pools money from many investors to purchase securities. Mutual funds are "the largest proportion of equity of U.S. corporations."