Portfolio managementTopic: mutual fund

Presented to

venkatesh sir Faculty of commerce Dos in commerce

ContentsIntroductionMeaning and definitionMyths of MFImportance sRisks in MFOrganization of MFDisadvantages of MFconclusionreferences

Introduction Of late, mutual funds have become a hot favorite of

millions of people all over the world. The driving force of mutual funds is the ‘safety of the principal’ guaranteed, plus the added advantage of capital appreciation together with the income earned in the form of interest or dividend. People prefer mutual funds to bank deposits, life insurance and even bonds because with a little money, they can get into the investment game. One can own a string of blue chips like ITC, TISCO, Reliance etc., through mutual funds. Thus, mutual funds act as a gateway to enter into big companies hitherto inaccessible to an ordinary investor with his small investment.

Meaning and definitionFund means A fund is made up of a variety of different types

of investment. The major benefit of funds is that your investment is spread over a wide range of assets, which in turn can reduce the risk.

Mutual fund :Mutual Funds A mutual fund is a common pool

of money into which investors place their contributions that are to be invested in different types of securities in accordance with the stated objective.

Cont….An equity fund would buy equity assets –

ordinary shares, preference shares, warrants etc.

A bond fund would buy debt instruments such as debenture bonds, or government securities/money market securities.

A balanced fund will have a mix of equity assets and debt instruments.

Mutual Fund shareholder or a unit holder is a part owner of the fund’s asset.

DefinitionAccording to Weston J. Fred and Brigham,

Eugene, F., Unit Trusts are “Corporations which accept dollars from savers

and then use these dollars to buy stocks, long term bonds, short term debt instruments issued by business or government units; these corporations pool funds and thus reduce risk by diversification”.

Thus, mutual funds are corporations which pool funds by selling their own shares and reduce risk by diversification.

Myths about Mutual Funds mutual funds offered assured return Mutual fund units are substitute for

equity shares Mutual fund schemes are risk freeMutual funds and mutual benefit

Types of Mutual Funds By Structure Open Ended FundsClose Ended Funds Interval FundsBy Investment ObjectivesGrowth Funds Income FundBalanced FundsMoney Market Funds Other Schemes Tax Saving Funds Special Funds Index Funds Sector Specific Funds

IMPORTANCE OF MUTUAL FUNDSChannelizing Savings for InvestmentOffering Wide Portfolio InvestmentProviding Better YieldsRendering Expertise Investment Service at

Low CostProviding Research ServiceOffering Tax Benefits Introducing Flexible Investment ScheduleProviding Greater Affordability and LiquiditySimplified Record KeepingSupporting Capital MarketKeeping the Money Market Active

RISKS ASSOCIATED WITH MUTUAL FUNDSMarket RisksScheme RisksInvestment RiskBusiness RiskPolitical Risks

ORGANIZATION OF THE FUNDThe structure of mutual fund operations ;Sponsoring Institution TrusteesAsset Management Company (AMC)CustodianTransfer agent

HOW TO INVEST IN MUTUAL FUNDS  Step-1 :Identify The Investment Need What Are My

Investment Objectives Need ? How Much Risk Am Willing To Take ?

Step -2: Choose The Right Mutual Fund The Track Record Of Performance Over The Last Few Relations to The Appropriate Benchmark And Similar Funds In The Same Category How Well The Mutual Fund Is Organized To Provide Efficient ,Prompt And Personalized Service

Step-3:select The Ideal Mix Of Schemes Investing In Just 1 Scheme may Not Meet All Your Investment Needs You May Consider Investing In A Combination Of Schemes To Achieve Your Specific Goals19 National institute of fashion technology ,Bangalore

FACILITIES AVAILABLE TO INVESTORSRepurchase FacilitiesReissue FacilitiesRoll Over FacilitiesLateral Shifting Facilities

DISADVANTAGES OF MUTUAL FUNSCosts Control Not in the Hands of an

InvestorNo Customized PortfoliosDifficulty in Selecting a Suitable Fund

Scheme

Regulates of mutual funds in IndiaThe regulating bodies of mutual funds in India

are as flows: Securities Exchange Board of India (SEBI)  Insurance Regulatory and Development

Authority (IRDA) Reserve Bank of India (RBI) 

How are MFs different from portfolios?A Portfolio Management Service varies from a

mutual fund. What’s common is that in both PMS and mutual funds, the actual investment decisions and stock selection are made by a fund manager. 

PMS offers personalized service and customized portfolio solutions and hence the cost structure is relatively higher. Mutual funds come under the purview of the Securities and Exchange Board of India (SEBI) and performance indicators are available in the public domain.

Comparison of investment in BanksV/S Mutual Funds

PARTICULAR BANKS MUTUAL FUNDSReturns Low Better

Administrative exp. High Low

Risk Low Moderate

Investment options Less More

Network High penetration Low but improving

Liquidity At a cost Better

Quality of assets Not transparent Transparent

Interest calculation Minimum balance between 10th. & 30th. Of every month

Everyday

Guarantee Maximum Rs.1 lakh on deposits

None

conclusionMutual funds are a method for investors to diversify risk

and to benefit from professional money management. The prospectus identifies key information about the fund including its operating boundaries and its costs. The fund manager operates within those boundaries and is a critical to achieving strong results within those boundaries. There are many, many types of mutual funds.

You can classify funds based on asset class, investing strategy, region, etc. Mutual funds have lots of costs. Costs can be broken down into ongoing fees (represented by the expense ratio) and transaction fees (loads )

The biggest problems with mutual funds are their costs and fees. Mutual funds are easy to buy and sell. You can either buy them directly from the fund company or through a third party. Mutual fund ads can be very deceiving.

Referenceswww.google.comSECURITY ANALYSIS AND PORTFOLIO MANAGEMENT

By S. KEVINFinancial market and services by gordon natarajanwww.moneycontrol.com

Presented byprakasha

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