A.P.G Mutual Fund Operation

8/8/2019 A.P.G Mutual Fund Operation

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Why Save?


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Why do we save money?

Future is uncertain

Cost of living (education, marriage) is rising

Needs and aspirations are increasing Better housing,vehicles, foreign tours

It is not possible to continue working for long hours beyond an age.time to sit back and make your money work for you.


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Y our dreams and aspirations ..


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E scalating costs of higher education

YE AR2000

YE AR2010

YEAR2020

MBA

ME DICINE

E NGIN EE RING

MBA

ME DICINE

E NGIN EE RING

MBA

ME DICINE

E NGIN EE RING

3.2 lacs5.0 lacs2.4 lacs

21.5 lacs

33.6 lacs

16.2 lacs

8.3 lacs

12.9 lacs

6.2 lacs


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B cos the cost of living is

..Products 1983 2003 2023

Toothpaste Rs.4 Rs.20 Rs.100

LPG Gas Rs.27 Rs.250 Rs.2315

E ducation 1000s 100,000s ?


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INTRODUCTION D ont have the time, skill or interest to pick individual

stocks?There is no need to give up on investing. Y ou can get a

professional to do the stock picking for you.

The easiest and least-expensive to do that is to build portfolio of mutual funds.There is no one-size-fits-all.The hottest funds of today are frequently the coldest

fund of tomorrow.There is more risk when you buy a fund thats at the topof the performance charts then there is when you buy afund at the bottom. says A. Michael Lipper, chairman of Lipper Investments a mutual fund information andranking service based in New Y ork.


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What is Mu t u al Fund ? Mutual fund is pool of money collected frominvestors and invested according to statedinvestment objective.Mutual fund investors are like shareholdersand they own the fundMutual funds invest in marketable securitiesaccording to the investment objectiveThe value of investments can go up or down,changing the value of investors holdings


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NAV of mutual fund fluctuates with market pricemovements

Investors hold a proportionate share of the fund in themutual fund . New investors come in and oldinvestors can exit, at prices related to NAV per unit.The fund company employs an investment manager ,who chooses the specific stocks to buy and sell.Mutual funds make investing easy . Y ou buy a fundwith general mission and let the manager worry about

exactly what stocks to buy and when to sell. After all,thats all fund managers business and you can feelcomfortable going about your own.


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Ne t Asse t V al ue

Ex ampl e E xample: NAV XYZ Mutual Fund owns assets totaling

10,000,000 and liabilities equal to 500,000 with500,000 shares outstanding

Therefore, NAV is:Rs.10,000,000 - 500,000 / 500,000

Rs.19/share


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Ince pt ion of Mu t u al Fund in

Indi a U TI was the only Mutual Fund during period1963-87U TI was the only fund for long period andenjoyed monopoly statusU TI is governed by the U TI Act 1963

In 1987 banks, financial institutions andinsurance companies in the public sector were

permitted to set up mutual funds

SE

BI got regulatory powers in 1992


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SBI was the first bank sponsored mutual fundto be set upThe private sector players were allowed to setup mutual fund in 1993

In 1996, the mutual fund regulations weresubstantially revised and modifiedIn recent years, the growth in private sector

funds has been at a higher rate, U TI holdsabout 50% of the total assets and the rest of the

players, the balance 50%


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Mutual Fund Operation

Flow Chart


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For m of Mu t u al Funds


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OPEN ENDED FUNDS

D aily sale and purchase possible No fixed MaturityFund is the secondary marketD aily NAV declared on which new salesand purchases possibleInstant liquidity

No lock-in period


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CLOSE ENDED FUNDS

Purchased only in NFO

Fixed maturityFund is the primary marketIt is having a lock-in-periodD ividend and growth both or one is

provided on this fund


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Ty p es of Mu t u al Fund

EQUITY FUNDS

DEBT FUNDS

MONEY MA RK ETFUNDS


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EQUITY FUNDS These funds mainly invest in shares of companies.

They can whether invest in blue chipcompanies or new established companies.Generally, the investment objective of thisclass of funds is long-term capital growth

with some income.Rate of return and risk both are high inthese funds


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DEBT OR FIXED-INCOME

FUNDS Also kn ow n as fix ed inc ome fun dsWhe n re f err ing t o m utu a l fun ds, the terms "fix ed- inc ome ,""b ond, " and "inc ome it mea ns tha t mo ney will b e inv ested ingover nme nt and corpora te de bt .

T he pr imary obj ectiv e of t hese fun ds is to pro vide a steady cash flow to inv estors.As suc h, the aud ienc e f or these fun ds consists of conser va tiv e

inv estors and re ti rees. Bond fun ds are lik ely to pay h igher re tu r ns tha n c er tific a tes of depos it and mo ney mar k et inv estme nt s, but b ond fun ds are n't

witho ut r isk .F or examp le, a fun d spe cia lizing in h igh-y ield junk b onds is m uc h more r isk y tha n a fun d tha t inv ests in g over nme nt secu r iti es.Fu r thermore, near ly a ll b ond fun ds are subj ect t o int eres t ra te

r isk , wh ich mea ns tha t if ra tes go up the va lu e of t he fun d goes dow n .


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MONEY MARKET FUNDS

The money market consists of short-term debtinstruments, mostly Treasury bills .This is a safe place to park your money.

Y ou won't get great returns, but you won'thave to worry about losing your principal .A typical return is twice the amount you

would earn in a regular checking/savingsaccount.


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What a re th e fees? Mu t u al funds c a n ei th er be p urc ha sed th roug h a:

Fees can be broken down into two categories:1. Ongoing yearly fees to keep you invested inthe fund.2. Transaction fees paid when you buy or sellshares in a fund ( loads )


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Lo a ds a re fur th er divided in t o

th ree pa r t s :- Front-end loads - These are the most simple type of load: you pay the fee when you purchase the fund. If you invest Rs.1,000in a mutual fund with a 5% front-end load , Rs.50 will pay for the sales charge, and Rs.950 will be invested in the fund.

Back-end loads - These are a bit more complicated. In such afund you pay the a back-end load if you sell a fund within acertain time frame. A typical example is a 6% back-end loadthat decreases to 0% in the seventh year. The load is 6% if yousell in the first year, 5% in the second year, etc. If you don'tsell the mutual fund until the seventh year, you don't have to

pay the back-end load at all.


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3 No- load: An investor pays no fee upfront, or

in the future.* All mutual funds are subject to management

expense ratios (M E R). This is a fee charged by thefund company to cover the expenses for themanagement of the fund. It is accrued daily basedon a percentage of the total value.


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MATHEMATICS OF INVESTING


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The future value

equation

FV= PV (1+r) nFV=Future ValuePV=Present Valuer=Rate of returnn=No. of compounding periods


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E xampleAmt invested in no load mutual fund Rs.10

lakh, four years ago. E xpected rate of return

is 10% calculate future value

FV= PV(1+r)n

FV=10(1+10%) 4FV= 14.64 lakh


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The more you save, makes a difference

Growth rate of 7% p.a.

Amount saved per month

Total amountsaved

Value after 25years

5,000 1,500,000 4,073,986

3,000 900,000 2,444,391

1,500 450,000 1,222,196

1,000 300,000 814,797


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The sooner you start, makes

a differenceRs.1000 invested p.m. @ 7% p.a. till the age of 60

Starting Age Total AmountSaved

Value At the ageof 60

25 420,000 1,811,561

30 360,000 1,227,087

35 300,000 814,797

40 240,000 523,965


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The more your fund earns, makes adifference

Rs.1000 invested p.m.Growth Rate Value after 10

yearsValue after 25years

6% 164,699 696,459

8% 184,166 957,367

10% 206,552 1,337,890

12% 232,339 1,897,635


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If you are born poor, its not your mistake. But, if you die poor its your mistake.

- Bill GatesI think sound investing can make you verywealthy if youre not in too big of a hurry. And

it never makes you poor, which is better. - Warren Buffet


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CNBC

Equities

R EMAINCONFUSED

RBI Bond s,

M utual F und s

Bank D eposits

NSC In sura nc e

PLAN

?


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Co mpa rison of differen t Inves tm en t

Avenues


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H ighLow?H

ighVeryH i hH ighD irect E q

H ighLow12-15%H ighH ighH ighMF-E quity

H ighLow5-7%Moderate

Moder ate

H ighMF- D ebt

ModerateLow5-6%Moderate

LowLowInsurance

LowH igh8%Moderate

LowLowPO MIS

H igh Nil8%Moderate

LowLowPPF

H ighH igh8%Moderate

VeryLow

LowRBI Bonds

H ighH igh5%LowLowLowBank FD s/POD eposits

ConvenienceTaxabilityReturn*ReturnRisk LiquidityAsset class


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Never consider the possibility of failure; as

long as you persist, you will be successful


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SIP What is SIP ?

It is systematic Investment PlanInvest a fixed amount, at regular,

predetermined intervals and use the

market fluctuations to your benefitThe markets are volatile: they moveup and down in an unpredictable

manner


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Why SystematicInvestment

Plan?


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M ar k ets R ising F alling V ola til e

Month Amtinvsted

NAV U nitsalloted

NAV U nitsalloted

NAV U nitsalloted

1 1,000 10 100 10 100 10 100

2 1,000 12 83.33 8 125 12 83.33

3 1,000 14 71.43 6 166.67 8 125

4 1,000 16 62.50 4 250 10 100

Tota l 4000 52 3 17. 26 28 64 1.67 40 408 .33

AveragePurchase Price

13 7 10

Average Cost Per

U nit

12.61 6.23 9.80


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M a gic of SIP in Equi t y Funds

Can you estimate the approx. value of Rs.1000 invested per month for 30yrs at--

---------?8%15%

20%


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Can you estimate the approx. value of Rs.1000 invested per month for 30yrs at-----

------?8% - 1.5 crores15%

20%


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Can you estimate the approx. value of Rs.1000 invested per month for 30yrs at-----

------?8% - 1.5 crores15% - 7.0 crores only

20%


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Can you estimate the approx. valueof Rs.1000 invested per month for 30yrs at-----------?

8% - 1.5 crores

15% - 7.0 crores only20% - 23.0 crores (simply)


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S t ruc t ure of Mu t u al

Fund Mutual funds in India have a 3-tier structure of Sponsor-Trustee-AMC

Sponsor is the promoter of the fundSponsor creates the AMC and the Trusteecompany and appoints the Boards of both thesecompanies, with S E BI approval

A trust deed is signed by trustees and registeredunder the Indian Trust ActThe trustees appoint AMC to actually manage theinvestors money


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Investors money is held in the Trust (the mutualfund). The AMC gets a fee for managing the funds,according to mandate of the investors.The trustees make sure that the funds are managedaccording to investors mandate.

Sponsor should have at least 5-year track record infinancial services business and should have made

profit in at least 3 out of the 5years.Sponsor should contribute at least 40% of the capitalof the AMC.An AMC cannot engage in any business other than

portfolio advisory and management.


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AMC should be registered with S E BIAMC should have net worth of atleast Rs. 10crore at all times.An AMC of one fund cannot be Trustee of another fund.AMFI is an industry association of mutualfunds.


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Ex ampl e of S t ruc t ure of Mu t u al

Fund Co mpa ny H D FC Mutual Fund

Sponsors:- H ousing D evelopment FinanceCorporation LimitedA.M.C.:- H D FC Asset Management

Company LimitedTrustee:- H D FC Trustee Company Limited


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M aj or P la yers of Mu t u al

Funds H D FCTATA

RelianceSundaramCH OLA

MAN D LU MMorganStanley

BIRLAING Vysya

H SBCJM MutualFranklin Templeton

U TI


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To p Five P la yers

R E LIANC EU TIICICIH D FC

SBI


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Indian Mutual Fund with

H ighest Growth till now

Reliance Power D iversifiedWith growth of 138%


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AD VANTAG E S OF M U TU AL F U ND


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Guess Who is this Man?


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Warren Buffet:- The great

investor of all time


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Mutual Fund Investmentsare subjected to Market

Risks.Read the offer document

carefully before

investing .


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A.P.G. Inves tm en t Advisors


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E -mail:- [email protected]@gmail.com

[email protected]

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A.P.G Mutual Fund Operation

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