Open ended Meaning Features Objective is income generation Not publically traded the fund itself repurchases resells Instant liquidity Free entry amp exit NAV Can be sold back to the Mutual Fund ID: 1028597
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1. Classification of Mutual Funds
2. Open endedMeaningFeatures :Objective is income generationNot publically traded, the fund itself repurchases/ resellsInstant liquidityFree entry & exitNAVCan be sold back to the Mutual Fund
3. Close ended schemeABC co launched the scheme on 11th sept 2010 At BSE.11th – 25th September26th september
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5. Closed-End FundsIssues a fixed number of shares at a given point in timeCollect money from investors through IPO and use this money to invest in securities. maturity period of securities are fixed at the time of IPO.( 3-5 yearsSuited to specialized investing in small or illiquidMain objective is capital appreciationPublically tradedFund closes after stipulated periodLock in period * Assets are Net Assets, expressed in Millions, and exclude leveraged capital (preferred stock, debt, etc.).
6. Interval FundsFeatures of both open and close endedMay be traded on stock exchange or may be open for sale or redemption during predetermined interval.Different from traditional close ended funds
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13. GeographicalDomestic : Off shore : UTI is the first institution to initiate off shore funds
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15. Mutual Fund Investment Strategies
16. Systematic Investment PlanInvest in funds regularly.Set apart a sum every month or quarterSave regularly and build up an investmentBenefits / features:Power of compounding by investor nowCost averagingConvenienceDisciplined investing
17. Advantages of SIPInculcates discipline in investmentInvesting at pre defined intervals reduces riskWorks in volatile marketHelps in averagingDo not need large sum for investmentWe can stop, start or modify your SIP anytime
18. Systematic Transfer PlanAn STP is a plan that allows investors to give consent to a mutual fund to periodically transfer a certain amount / switch (redeem) certain units from one scheme and invest in another scheme of the same mutual fund house.
19. Fund house : ABX Co.SCHEME : Equity & DebtInvestor : has begun investing EquityAfter 6 months, wants to change his investment patternRequest ABX co. To switch to debt fund
20. Advantages of STPHigher returns STPs allows you to earn higher returns on your investments by shifting to a more profitable venture during market swings. Gaining market advantage in this method maximizes the profits through securities bought and sold in the capital sector.Stability During times of high degree of volatility in the stock market, investors can transfer their funds via an STP into relatively safer investment schemes such as debt funds and money market instruments. This allows an investor to ensure the safekeeping of his/her financial resources while earning stable returns at the same time.Rupee Cost Averaging This method is implemented while investing in Mutual Funds via STP, allowing investors to lower their average costs incurred on investments. Rupee Cost Averaging follows the technique of investing in funds when their average price is low and selling them when their market value increases, thereby realizing capital gains on the individual securities.
21. Systematic Withdrawal PlanSWP stands for systematic withdrawal plan. Under SWP, if you invest lump sum in a mutual fund, you can set an amount you’ll withdraw regularly and the frequency at which you’ll withdraw.For example, let’s say you invested in HDFC Top 200 Fund an amount of ₹1 lakh for a year. Let’s assume that you decided to withdraw an amount of ₹10000 per month. So every month, your investment in the fund will reduce by ₹10000. The amount left every month after withdrawal will continue to remain invested.
22. FeaturesIt is a facility to redeem units regularlyYou can choose the frequency of withdrawalsYou can either withdraw a fixed amount or only the capital appreciationIt is ideal for investors seeking regular income from their investments
23. Benefits of SWPEasy WithdrawalMeeting financial GoalsProtection from market fluctuationEnjoy average returnTax benefitsAssurance of Return & Contingency withdrawal
24. NAV : NET ASSETS VALUEGross investment in the mutual fund = R. 1000000Admn & other liabilities : Rs. 200000Balance = Rs. 800000 / 40000NAV = ( Market Value of the fund investment + Receivable + Accrued Income) – ( Liabilities + Accrued expenses)--------------------------------------------------------------Number of outstanding Units of Mutual funds
25. Problem on NAVScheme Name : XYZScheme size : Rs. 50,00,00,000Face vale of unit : Rs. 10Market value of shares : Rs. 75,00,00,000Find out the NAV of XYZ scheme for today.
26. AnswerNAV = market value of investment / No of units outstanding.= Rs. 75,00,00,000 / 5,00,00,000= Rs. 15 / unitRs. 50,00,00,000 / Rs. 10= 5,00,00,000 crores units
27. A fund’s investment at market value total Rs. 700 crores. The total liabilities stand at Rs. 50 lacs and the number of units outstanding is 28 crore. What is the NAV?Answer :NAV= ( Market value of investment – Liabilities) / Number of units outastanding= Rs. 700 Crore – 0.5 Crore( Note : Rs. 50 lacs means 0.5 crore) / 28 crore= (700 – 0.5) / 28699.5/28=Rs. 24.98 / Unit
28. Problem 3An open ended fund with 20000 units outstanding, had the following items in its balance sheet.Investment at market value : Rs. 2,00,000Other assets : Rs. 40,000Current Liabilities : Rs. 50,000Calculate the fund’s NAV per unit.
29. Problem 4Suppose a scheme with 200 units has the following items in its Balance sheet.Unit Capital : Rs. 20,000Investment at market value : Rs. 50,000Other assets : Rs. 7,000; Other liabilities Rs 4,000Issue expenses not written off Rs. 1,000Reserves Rs. 34,000Calculate NAV
30. Portfolio maturityWhat is maturity?Maturity of portfolio = applicable to Debt fundsWhy this concept?
31. Type of InvestmentAmount involved (rs.)Individual Proportion (%)Individual MaturityWeigtageBond A30000502 yrs1 yearBond B1000016.6830.5004Bond C2000033.3351.665Total 60,000100%3.1654
32. Entry Load & Exit loadLoad? – Charge/ imposed on the investorCost of distribution payment : income Entry load : Rs. 100 is invested by Mr. Ketan, reliance Entry Load @2.25%Rs. 97.50 – Mutual fund investmentRs. 2.50 – Company will collect charge from the customerExit load