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For Internal Use Only / Not for Distribution to the Public
Some Myths About Mutual Funds
An Investor Education & Awareness Initiative By Franklin Templeton Mutual Fund
For Internal Use Only / Not for Distribution to the Public
• Mutual Funds lack the excitement
Myth Clarified: The excitement can be done away with for long-term wealth
creation through mutual funds
• Mutual Funds are too diversified
Myth Clarified: In fact diversification helps to reduces risk, while a concentrated
portfolio elevates risk.
• Mutual Funds are expensive
Myth Clarified: In fact they reduce your cost of investing
Myths Based On Incorrect Beliefs
For Internal Use Only / Not for Distribution to the Public
• A Mutual Fund scheme invests in the same stocks as its benchmark index
Myth Clarified: The benchmark index only serves the stated purpose i.e. benchmarking returns. It
offers investors the opportunity to evaluate the fund's performance. It need not always construe
that an actively managed mutual fund scheme would invest in stocks that form a part of the
benchmark index
• Mutual Funds invest up to 35% in debt
Myth Clarified: While such an allocation may form a part of the investment mandate of equity
mutual funds, they may not use the mandate in a stricter sense to invest in debt
• Funds with more stars/higher rankings provided by independent third party agencies make
better buys
Myth Clarified: At best, rankings and ratings can serve as starting points for identifying a broader
set of "investment-worthy" funds; but they are not the end to picking winning mutual funds.
• Once the fund house makes the grade, so do all its funds
Myth Clarified: Just because a fund house makes the grade, it doesn't necessarily mean that all
its funds are worth investing in.
Myths Based On Incorrect Facts
For Internal Use Only / Not for Distribution to the Public
• Only Small investors go in for SIPs
Myth Clarified: Please note that SIP stands for Systematic Investment Plan (SIP) and not Small
Investors Plan. They infuse a disciplined investment habit of investing regularly and provide you the
benefit of compounding along with rupee-cost averaging.
• Rupee cost averaging can be done in a stock itself – then why SIP?
Myth Clarified: SIP experimented on a single scrip, can expose you to more volatility
unlike SIP in a mutual fund scheme which reduces the risk, due to diversification provided by mutual
funds.
• SIP Mutual Fund schemes are different from lump sum mutual fund schemes
Myth Clarified: The fact is SIP is just the mode of investing. There are no special mutual fund
schemes for SIP investments.
• Lump sum investments cannot be done in a mutual fund scheme, where a SIP account exists
Myth Clarified: SIP is just the mode of investing. Hence investing a lump sum amount to a mutual
fund scheme where your SIP exists is possible.
Some Common Myths About SIP
For Internal Use Only / Not for Distribution to the Public
• I’ll be penalised if I miss one or two SIP dates
Myth Clarified: Since an ECS mandate is usually signed, the question of missing SIP dates
doesn’t arise. Also on the SIP date if you do not have sufficient funds in your bank account, you
aren’t penalised by the AMC ; you will simply miss that SIP installment, but your account will
remain active
• Markets are at a low to start an SIP
Myth Clarified: Lower level markets can in fact be the right time to start an SIP and gain from
future upside. Buying “low” is better than buying “high”
• In case of SIP in tax saving mutual fund schemes, entire money can be withdrawn after
3 years
Myth Clarified: The fact is your every installment of SIP should have completed the lock-in tenure
of 3 years for you to be in a position to withdraw.
Some Common Myths About SIP
For Internal Use Only / Not for Distribution to the Public
Points To Remember
• Excitement is not good for one’s investment portfolio in the long run
• Diversification benefit offered by mutual fund investing helps you
reduce risk
• Actively managed mutual fund schemes do not necessarily invest in
the same stocks as its benchmark index
• Star ratings / rankings can serve as a starting point, but they aren’t
the end to picking winning mutual fund schemes
• Never invest only on the basis of fund house
For Internal Use Only / Not for Distribution to the Public
Points To Remember
• SIPs infuse regular investing habit
• SIPs offer the benefit of rupee-cost averaging and compounding
• Mutual fund schemes for SIP investment are the same as those for
lump sum investments
• There is no penalty for missing an SIP installment
• SIP in a tax saving mutual fund scheme has a lock-in tenure
for each installment
For Internal Use Only / Not for Distribution to the Public
we now invite you to test your learning by taking up this simple quiz
(and win exciting prizes!)
Lets Do A Short Quiz!
7
For Internal Use Only / Not for Distribution to the Public
1) When markets are high, ideally it may be the right time to invest via the SIP mode
A. True B. False
2) Investing in a mutual fund scheme only on the basis on star rating / ranking is
A. The end to picking winning mutual fund schemes
A. Just the starting point
B. Start and end to pick winning mutual fund schemes
C. None of the above
3) If the first installment of monthly SIP in a tax saving mutual fund scheme having a lock-in
period of 3 years begins in November 2013, when would the 3rd installment of the tax saving
mutual fund scheme get over
A. November 2016 B. January 2017
C. December 2016 D. November 2017
Quick Quiz
8
For Internal Use Only / Not for Distribution to the Public
4) You will be penalized for missing one or two SIP dates
A. True
B. False
5) An actively managed mutual fund scheme does which of the following?
A. Strictly replicates its benchmark index for its portfolio
B. Need not always replicate its benchmark for its portfolio
C. Need not provide you SIP
Quick Quiz
9
For Internal Use Only / Not for Distribution to the Public
© 2014 Franklin Templeton Investments. All rights reserved.
Thank You For Participating!
10
For Internal Use Only / Not for Distribution to the Public
© 2014 Franklin Templeton Investments. All rights reserved.
Mutual Fund Investments Are Subject
To Market Risks, Read All Scheme
Related Documents Carefully.
11
For Internal Use Only / Not for Distribution to the Public
© 2014 Franklin Templeton Investments. All rights reserved.
FTI PPT 4:3 01/14
Franklin Templeton Asset Management (India) Pvt. Ltd.
Indiabulls Finance Centre, Tower 2,
12th and 13th floor, Senapati Bapat Marg,
Elphinstone (W)
Mumbai 400013
Tel (91-22) 6751 9100
Fax (91-22) 6639 1281
www.franklintempletonindia.com
Caveat (Arial Narrow 10pt.)