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Presentation on theme: "UTI MUTUAL FUND Welcome “MUTUAL FUND – CONCEPTS AND BENEFITS"— Presentation transcript:

Delegates to Program “MUTUAL FUND – CONCEPTS AND BENEFITS Presented by Sh Rakesh Trikha, VP, Regional sales Head , UTI Mutual Fund , New Delhi

2 An introduction to Mutual Funds

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

4 Graphical Representation

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 Management experience and resources to thoroughly analyze the economy/markets to spot good investment opportunities Introduction : 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 Slide Conclusion : 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 by investing in a single stock/bond Invests in a broad cross section of industries or companies – negative performance of one security will not have as much of an impact on the fund Introduction : 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 securities Very little paperwork Helps avoid problems such as bad deliveries, delayed payments and unnecessary follow up with brokers and companies

9 Why invest in a mutual fund?..(4)
Tax Efficiency: Some mutual fund schemes offer tax benefits under Section 80-C TAX FREE Dividends/LONG TERM CAPITAL GAIN( > 12 month) under Equity schemes Only 10 % Long term capital gain under Debt Schemes v/s High taxation under FD/Post office schemes Mutual funds offer favourable post-tax returns However, the fund has to pay a distribution tax in many categories

10 Broad Classification Open Ended Constitution Close Ended Interval
Types of Mutual Funds Equity Funds Investment Objective Debt Funds Hybrid Funds

11 Types of Mutual Funds By Constitution

12 Open Ended Schemes Open-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 Schemes These 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.

15 Types of Mutual Funds By Investment Objective

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 Funds These 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 Funds Hybrid Funds Debt Funds Diversified Balanced Liquid Large-cap Monthly Income Plan Short-term Mid & Small-cap Income Gilt Sectoral Fixed Maturity Plan Index Tax 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- Sectoral These 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 80C Units 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).

SECTOR FUND Return SECTOR ROTATION FUND Thematic fund DIVERSIFIED FUND INDEX FUND Risk Leadership fund can give higher and sustainable return

25 Hybrid Funds Balanced 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 Paper Example : 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 market Example : UTI – MIS Advantage Plan

30 Debt Funds - Gilt Funds These 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

31 How do I make money from a
mutual 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 bought Income Distribution: The fund passes on the profits it has earned in the form of dividends Introduction : 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 investors Dividend Reinvestment :- The investor gets units equivalent to the amount of dividend declared which gets re-invested into the scheme.

35 Modes Of Investment Lump-sum investment – Making a one time investment in a scheme Systematic Investment Plan – Investing a small sum of money regularly Systematic Transfer Plan – making a systematic transfer of profits from 1 fund to another Systematic 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 MF Entry 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 Aspects In case of dividend income In 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 Gain Long Term Capital Gain

41 Tax Rules for Mutual Fund Investors
EQUITY SCHEMES (Equity investment < 65% of fund size)* SHORT TERM CAPITAL GAINS LONG TERM TDS Resident Individual/HUF 10% NIL Partnership Firms NRIs STCG 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 TERM CAPITAL GAINS LONG TERM TDS Resident Individual/HUF Marginal rate 10%(20% WITH INDEXATION) NIL Partnership Firms 30% NRIs STCG-30%, LTCG-20% (after indexation) *FMP, MIPs, Liquid Funds etc.

43 Tax Rules for Mutual Fund Investors

44 UTI Liquid and Liquid Plus
UTI Liquid Fund-Cash Plan UTI Liquid Plus Fund Entry Load NIL Exit Load 0.15% if redeemed between 0-7 days DDT 28.325% %

MF units are exempt GIFT TAX INCOME TAX PROVISIONS ON CLUBBING FOR GIFT OF UNITS Dividend Income As dividend is tax free in hands of unit holder, hence no tax applicable on either Donee or Donor ST/LT Capital Gain Loss If 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
Asset Type of income Tax Listed equity shares Dividend Exempt Unlisted equity shares Equity-oriented mutual funds Income distribution Non Equity mutual funds Derivatives (futures) No income NA Gold/precious metals Paintings Real estate Rent Taxable

47 Investment option – Tax on Capital Gain
Asset Period of holding required to make asset long-term Tax on profit, if asset is long-term Tax on profit, if asset is short-term Listed equity shares 12 months NIL 10% Unlisted equity shares 20% Normal rate Equity-oriented mutual funds Non equity mutual funds Derivatives (futures) N A NA Gold/precious metals 36 months Paintings Real estate

48 Risks Involved in Mutual Funds
Market Risk Depends on the volatility of market. Inflation Risk Inflation risk occurs when prices rise faster than returns.

49 Risks Involved in Mutual Funds
Interest Rate Risk This generally applies to debt funds.An increase or decrease in interest rate affects the bond prices. Investment Risks The 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: Toll Free No

51 THANK YOU Disclaimer Risk 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


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