mutua.pptx
- 1. ASPECTS OF MUTUAL FUND DISTRIBUTION Presented by : TEAM WEALTH BOOSTERS
- 2. What is Mutual Fund? Common pool of funds contributed by investors and invested in accordance to the objectives. Investments are held in a trust of which the investors alone are the joint beneficial owners. Trustees oversee the management by investment manager.
- 3. Advantages and Disadvantages of Mutual Fund Advantages Liquidity Diversification Expert Management Quick and Painless Process Invest in Smaller Denominations Suit Your Financial Goals Tax-efficiency Transparency Disadvantages No Guarantee on Return Lock-in-period No Control over portfolio Management Fees Choice Overload No Control Over Cost
- 4. How to choose mutual fund for investment? Think of your Investment horizon Check MF performance against benchmark over a period Of time. Check MF performance vis a vis its categories Of funds. Check whether MF performance is consistent over the years. Check Fund Manager Experience. Check AMC track record Check fund's Expense Ratio Read the Fact Sheet of MF and its various schemes.
- 5. Structure of Mutual Fund
- 6. Constituents and their Roles Constituents Role Custodian Holds funds and securities R&T Agent Maintains and services investors records Bank Enables collections and payments Auditor Audit scheme accounts Distributors Distribute fund products to investors Brokers Execute transactions in securities Fund Accountants NAV calculation KRA KYC of investors
- 7. Classification of Mutual fund Classification of Mutual Funds Based on Structure Open Ended Funds Close Ended Funds Interval Funds Based on Investment Objective Debt Funds Equity Funds Hybrid Funds Based on Investment Style Passive Funds Active Funds
- 8. Classification Based on Structure Open Ended Funds No fixed maturity date. Accept continuous sale and re-purchase rate Transactions are NAV-based Unit capital is not fixed. Close Ended Funds Run for a specific period. Offered in an NFO but are close for further purchases after NFO. Unit capital is kept constant. Interval Funds Variant of close-ended funds. Becomes open-ended at specific intervals. Have to be mandatorily listed.
- 9. Classification Based on Investment Objective Debt Funds Invest in short and long term debt instruments. Aim to provide regular income. Equity Funds Invest in equity securities. Aim to provide growth and capital appreciation over long term. Hybrid Funds Invest in a combination of equity and debt securities. Aim to provide for both income and capital appreciation Proportion of equity and debt may vary.
- 10. Classification Based on Investment Style Passive Funds Replicate a market index. Invest in same securities and in same proportion as that of index. No active selection of any stock/sector. Expenses are lower. Portfolio is modified every time index composition changes. Active Funds Invests in securities and sectors that may offer a better return that the index. Actively manage the allocation to market securities and cash. May perform better or worse than the market index. Incur a higher cost than passive funds.
- 11. How to Invest in Mutual Fund? Via Physical Fund Application Form Via Online Mode( website of mutual fund) Via AMFI Registered Mutual Fund Distributor (using physical form/online/mobile app Via Mobile App of Mutual Fund
- 12. Mutual Fund Investment Procedure Indicate whether you are First Time Investor/Existing Investor. Visit official website of KRA and check whether you are KYC compliant or not. Provide your details like name, address, etc. Submit Bank account details and copy of “Cancelled Cheque”. Once documents are accepted by Mutual Fund Company, you may start making investment.
- 13. Investment Modes in Mutual Funds Direct Mutual Funds Directly offered by fund house. No involvement of third party agents- brokers or distributors. No commissions or brokerage. Have low Expense ratio (because of no commissions). Have high NAV Return is higher due to a lower expense ratio. Regular Mutual Funds Bought through an intermediary. Intermediaries can be brokers, advisors or distributors. Commissions and brokerage paid. High Expense ratio as there are commissions to pay. Low NAV. Return is lower due to a higher expense ratio.
- 14. Investment Modes in Mutual Fund Systematic Investment Plan (SIP) Lump-sum Investment One time investment. Usually, large sum of money is invested in one go. Investor faces risk of volatility in markets. Staggered Investment. Period of commitment - 6 months, 1/3/5 years investment. Specific intervals - monthly, quarterly, half-yearly. Made on specific dates e.g. 1st, 5th, 10th, 15th of every month.
- 15. Mutual Fund Plans – Growth vs Dividend Options Growth Option Dividend Payout Option Dividend Re-investment Option Gains made in portfolio are retained and reflected in NAV. Realized profit/loss is treated as capital gains or loss. No increase or decrease in number of units, except if units are purchased or sold, by the investor. Fund declares dividend from realized profits. Amount and frequency varies and depends upon distributable surplus. NAV falls after dividend payout to the extent of dividend paid. Dividend is re-invested in same scheme by buying additional units at ex- dividend NAV. Number of units standing to the credit of the investor, increases each time a dividend is declared, and reinvested back into the scheme.
- 16. Mutual Fund Distributor Mutual fund distributor is an individual or entity that helps investors to buy and sell mutual funds. They earn income in the form of commission from mutual funds investment. They should understand the investor's situation, risk tolerance levels and financial goals to suggest a suitable plan for them. Any individual above the age of 18 years can act as a mutual fund distributor or agent. Also, the candidate should qualify for class 12 or class 10 with three years of diploma. The minimum requirement to become a mutual fund distributor is the completion of NISM Series V-A: Mutual Fund Distributors Certification. Eligibility
- 17. Role Of Mutual Fund Advisor
- 18. Mutual Fund Distribution Channels Mutual fund distributors are not directly registered with the SEBI in India. The Securities and Exchange Board of India has mandated the distributors or agents of mutual funds to register with the AMFI (Association of Mutual Funds of India) through various circulars. They also bind to follow the code of conduct prescribed by AMFI. But some stockbrokers, sub-brokers, and investment advisors registered with SEBI for the distribution of mutual funds.
- 19. Types Of Distribution Channels Direct Marketing This involves purchasing of funds unit directly from mutual funds. It contributes 20% of total sales of mutual funds. It involves personal selling, direct mail and telemarketing. Joint Calls This is used when potential customer is highly on big numbers and it is not possible to contact them individually. The mutual fund officer and an agent like broker and financial planner together visits the prospective customers and brief him about the funds. Banks In recent years new concept of mutual funds banking has emerged offering new product and services for the customers who avail mutual funds products through banks. Customers are offered many of the mutual funds product with dissimilar schemes and return expectations to the bank based on their risk look.
- 20. Distribution Companies Instead of having numerous individual distribution fund houses can interact with distribution companies. In , India there are very few distribution companies and large scale of mutual funds distribution is done through mediators only. Post Office Mutual houses are distributing their schemes in joint venture with fund houses.
Editor's Notes
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