Presentation on theme: "UTI MUTUAL FUND Welcome “MUTUAL FUND – CONCEPTS AND BENEFITS"— Presentation transcript:
1 UTI MUTUAL FUND Welcome “MUTUAL FUND – CONCEPTS AND BENEFITS Delegates to Program“MUTUAL FUND – CONCEPTS AND BENEFITSPresented by Sh Rakesh Trikha, VP,Regional sales Head , UTI Mutual Fund , New Delhi
3 What are mutual funds? A pool of money. Investors having a common interest.In accordance with the stated objective.Fund manager invests money on investors behalf.Example:- Equity fund invests in equities, Debts funds invests in bonds, debentures, gilts etc. and Hybrid fund invest in both
5 History Of Mutual Funds Indian MF Industry has gone through 3 phases :-Phase – 1987 (UTI was the only player)Phase – 1993 (Entry of Public sector Banks backed Mutual Funds)Phase onwards. ( Mutual funds from Pvt. Sector start operations and regulatory authority SEBI comes onto being)
6 Why invest in a mutual fund?..(1) Professional Managementexperience and resources to thoroughly analyze theeconomy/markets to spot good investment opportunitiesIntroduction : When compared to investing directly in equities or debt, investing in a mutual fund is more convenient, less time consuming, and reduces your exposure to risk – here are some of the best reasons to invest through a mutual fund Show SlideConclusion : With crores of rupees under management, and a dedicated team of professionals with all the necessary infrastructure, a mutual fund house is better equipped to manage money than you would be on your own
7 Why invest in a mutual fund?..(2) Diversification:Reduces the risk to which you would've been exposed byinvesting in a single stock/bondInvests in a broad cross section of industries or companies –negative performance of one security will not have as muchof an impact on the fundIntroduction : Spreading your investment across sectors, asset classes and companies greatly minimizes risk Show Slide
8 Why invest in a mutual fund?..(3) Liquidity & Convenience:You will be able to get your money back within a short period as compared to other securitiesVery little paperworkHelps avoid problems such as bad deliveries, delayedpayments and unnecessary follow up with brokers andcompanies
9 Why invest in a mutual fund?..(4) Tax Efficiency:Some mutual fund schemes offer tax benefits under Section 80-CTAX FREE Dividends/LONG TERM CAPITAL GAIN( > 12 month) under Equity schemesOnly 10 % Long term capital gain under Debt Schemes v/s High taxation under FD/Post office schemesMutual funds offer favourable post-tax returnsHowever, the fund has to pay a distribution tax in many categories
10 Broad Classification Open Ended Constitution Close Ended Interval Types of Mutual FundsEquity FundsInvestment ObjectiveDebt FundsHybrid Funds
12 Open Ended SchemesOpen-ended schemes do not have a fixed maturity period / lock-in-period.Investors can buy or sell units at current NAV on any business day.
13 Close Ended Schemes Close-ended schemes have fixed maturity periods. Investors can buy into these funds during the period when these funds are open in the initial issue.For Example :- UTI – Lifestyle fund, UTI wealth Builder Fund, UTI – Capital Protection Fund
14 Interval SchemesThese schemes combine the features of open-ended and closed-ended schemes.They may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV based prices.For example: Tax saving schemes where they are closed ended for 3 years usually and then become open-ended.
16 Equity Funds They invest the funds in stocks and shares of Companies. Investors can diversify their risks of investing in the markets in a typical equity oriented Mutual fund.
17 Debt FundsThese schemes invest in debt instruments such as corporate bonds, debentures and government securities.The prices of these schemes tend to be more stable as compared to Equity schemes.These schemes are ideal for conservative investors or those not in a position to take higher Equity risks, such as retired individuals.
18 Hybrid Funds Commonly known as Balanced Funds They invest in both equities as well as debt.The debt component in the Balanced schemes seek to regular income and the equity component aims to generate capital appreciation.Ideal for investors who would like to take slight exposure to equity but still want an element of safety in their portfolio.For Example :- UTI Balance Fund, UTI Mahila Unit Scheme , UTI Children Career Plan
19 Further classification Equity FundsHybrid FundsDebt FundsDiversifiedBalancedLiquidLarge-capMonthly Income PlanShort-termMid & Small-capIncomeGiltSectoralFixed Maturity PlanIndexTax saving
20 Equity Funds – Diversified The investment objectives does not restrict these funds from investing only in specific industries or sectors.These funds have a diversified portfolio of companies spread across a vast spectrum of industries.These schemes are exposed to equity price risks.For Example :- Leadership Fund ,
21 Equity Fund- SectoralThese schemes restrict their investing to one or more pre-defined sectors.These schemes are inherently more risky than general-purpose schemes.They are best suited for informed investors who wish to take a view and risk on the concerned sector.For Example :- UTI – Software fund, Services Fund, Pharma and Healthcare, Auto etc.
22 Equity Funds - Index based An Index serves as a relevant benchmark to evaluate the performance of Mutual Funds.Investors are comfortable investing in a fund that they believe is a good representative of the entire market.Index funds move in line with the Index in the falling market and provide the much-needed risk mitigation.Pure Index fund :UTI MIF (sensex)UTI NIF ( Nifty)Index based fund : UTI Index select Equity fund
23 Equity Funds - Tax Saving Also known as ELSS ( equity linked saving schemes ).Gives a tax benefit to the investors under Sec 80CUnits purchased cannot be transacted until completion of 3 years from the date of allotment of the respective Units.An example of ELSS scheme is the UTI Equity Tax Saving Plan (ETSP).
24 FUND POSITIONING Return Risk SECTOR FUNDReturnSECTOR ROTATION FUNDThematic fundDIVERSIFIED FUNDINDEX FUNDRiskLeadership fund can give higher and sustainable return
25 Hybrid FundsBalanced Funds – They invest in a combination portfolio where usually 60% is in Equity and 40% in debt.Monthly Income Plan – They have a higher component in debt even up to 80% and 20% in equity. They are a safe investment with a kicker from equity for returns.There can be multiple combinations depending upon scheme objectives
26 Debt Funds - Money Market Schemes These schemes invest in short term instruments such as commercial paper ("CP"), certificates of deposit ("CD"), treasury bills ("T-Bill") and overnight money ("Call").The schemes are the least volatile of all the types of schemes because of their investments in money market instruments with short-term maturities.
27 Debt Funds - Liquid Funds Liquid Schemes invest in call money market and short maturity papers.They are highly liquid and one can make investments in them even for a day.There are no Entry and Exit loads in liquid funds.For Example :- UTI – Liquid Cash Plan.
28 Debt Funds - Short-term Bond Funds They are good for investors who want to make investments for a period of 3-6 months.They usually deliver returns which are basis points more than the call money market rates.They invest in Corporate bonds and Commercial PaperExample : UTI Liquid Plus Scheme
29 Debt Funds - Income Funds These schemes invest in money markets, bonds and debentures of corporate with medium and long-term maturities.These are suitable for conservative investors who have medium to long-term investment horizon and are looking for regular income through dividend or steady capital appreciation.They usually deliver returns which are more than 100 – 150 basis points more than the call money marketExample : UTI – MIS Advantage Plan
30 Debt Funds - Gilt FundsThese schemes primarily invest in Government securities.Hence the investor usually does not have to worry about credit risk since Government Debt is generally credit risk free.For Example :- UTI Gsec Fund
32 Capital appreciation: As the value of securities in the fund increases, the fund's unit price will also increase. You can make a profit by selling the units at a price higher than at which you boughtIncome Distribution:The fund passes on the profits it has earned in the form of dividendsIntroduction : There are two ways in which you can make money from a mutual fund… Show Slide
33 Options to invest GROWTH OPTION Best suitable for investors looking for long term investments.The amount invested goes on accumulating.On redemption one would receive the market value of investment.It is also called as money accumulator.
34 Options to invest DIVIDEND OPTION Dividend Payout :- Suitable for investors who want regular income. The dividend amount comes in the hand of the investorsDividend Reinvestment :- The investor gets units equivalent to the amount of dividend declared which gets re-invested into the scheme.
35 Modes Of InvestmentLump-sum investment – Making a one time investment in a schemeSystematic Investment Plan – Investing a small sum of money regularlySystematic Transfer Plan – making a systematic transfer of profits from 1 fund to anotherSystematic Withdrawal Plan – withdrawal of funds from a scheme on a regular basis to gain regular income.
36 NAV The Term NAV means Net Asset Value. Net Asset Value is the market value of the securities held by the scheme. The market value of securities of a scheme NAV = ______________________________________________ Total number of units of the scheme on any particular date.For example, if the market value of a Mutual Fund scheme is Rs.200 lakhs and it has issued 10 lakh units of Rs.10 each, to the investors, then the NAV per unit of the fund is Rs.20.
37 Loads or Charges on MFEntry Load :- Generally all mutual funds especially equity funds have an entry load on its purchase.Entry load is calculated on the current NAV of the fund.Generally a fund house charges an entry load of 2% to 2.25%.
38 Contd..Exit Load :- An Exit load is charged by the fund house when one wishes to exit or redeem his units.Exit load is also calculated on the current NAV.Generally a fund house charges 1% exit load on all equity schemes if exited before 6 months.
39 In case of dividend income Tax AspectsIn case of dividend incomeIn the hands of the investors, dividend is tax-free.Dividend distribution tax is at the rate of 12.81% payable by the AMC only incase of Debt funds.
40 Capital Gain Tax Capital Gain = selling price – purchase price. Capital gains are of two types:Short Term Capital GainLong Term Capital Gain
41 Tax Rules for Mutual Fund Investors EQUITY SCHEMES (Equity investment < 65% of fund size)*SHORT TERMCAPITAL GAINSLONG TERMTDSResident Individual/HUF10%NILPartnership FirmsNRIsSTCG 11.33% (10%+10% SC+ 3%ES)* UTI Infrastructure Fund, Service Sector, DYF, Leader Ship Fund etc.
42 Tax Rules for Mutual Fund Investors NON EQUITY SCHEMES (Equity investment less than equal to 65% of fund size)SHORT TERMCAPITAL GAINSLONG TERMTDSResident Individual/HUFMarginal rate10%(20% WITH INDEXATION)NILPartnership Firms30%NRIsSTCG-30%, LTCG-20% (after indexation)*FMP, MIPs, Liquid Funds etc.
43 Tax Rules for Mutual Fund Investors DIVIDEND INCOMEDIVIDEND DISTRIBUTION TAXALL SCHEMESEQUITY SCHEMESLIQUID SCHEMESNON EQUITY SCHEMESResident Individual/HUFTAX FREENIL28.325%(25%+10SC+3%ES)(12.5%+10%SC+3%ES)Partnership Firms22.66%(20%+10%SC+3%ES)NRIs
44 UTI Liquid and Liquid Plus UTI Liquid Fund-Cash PlanUTI Liquid Plus FundEntry LoadNILExit Load0.15% if redeemed between 0-7 daysDDT28.325%%
45 WEALTH TAX &GIFT TAX FOR MF UNITS MF units are exemptGIFT TAXINCOME TAX PROVISIONS ON CLUBBING FOR GIFT OF UNITSDividend IncomeAs dividend is tax free in hands of unit holder, hence no tax applicable on either Donee or DonorST/LT Capital Gain LossIf the transferee or donee is:“spouse Son’s wife or minor son : gain/loss clubbed with that of the donor of units “Other independent donee : gain/loss treated as donee’s gain/loss and not clubbed with that of donor
46 Investment option – Tax on Income AssetType of incomeTaxListed equity sharesDividendExemptUnlisted equity sharesEquity-oriented mutual fundsIncome distributionNon Equity mutual fundsDerivatives (futures)No incomeNAGold/precious metalsPaintingsReal estateRentTaxable
47 Investment option – Tax on Capital Gain AssetPeriod of holding required to make asset long-termTax on profit, if asset is long-termTax on profit, if asset is short-termListed equity shares12 monthsNIL10%Unlisted equity shares20%Normal rateEquity-oriented mutual fundsNon equity mutual fundsDerivatives (futures)N ANAGold/precious metals36 monthsPaintingsReal estate
48 Risks Involved in Mutual Funds Market Risk Depends on the volatility of market.Inflation RiskInflation risk occurs when prices rise faster than returns.
49 Risks Involved in Mutual Funds Interest Rate RiskThis generally applies to debt funds.An increase or decrease in interest rate affects the bond prices.Investment RisksThe NAV of the schemes are linked to the equity performance of such companies and may be more volatile than a more diversified portfolio of Equities.
50 For Further Queries Reach Your Financial Advisor or UTI MF Team Dehradun at S.P.S Oberai , Chief Manager , Relationship Manager(s) , 982, website: utimf.com Toll Free No
51 THANK YOUDisclaimerRisk Factors : - All investments in Mutual Funds and securities are subject to market risk and the NAV of the Funds may go up or down depending on the factors & forces affecting the securities market. Past performance of the Sponsor/Mutual Fund/ Scheme(s)/AMC is not necessarily indicative of the future results. UTI CCP (Balanced Plan) is just the name of the scheme and not in any manner indicate the quality of the scheme, its future prospects or returns. The scheme is subjected to the risks relating to interest rate ,liquidity, securities lending, investment in overseas market, trading in equity and debt derivatives. There may be instances where no income distribution could be made.Please read offer document and consult your financial advisor before investing