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  1. 1. Investment Awareness for you
  2. 2. What do you do with your money?
  3. 3. Inflation eats up your savings over time !!! What's wrong with just saving?
  4. 4. What does inflation do to your expenses? ₹ 30,000 ₹ 40,000 ₹ 60,000 ₹ 80,000 Today 5 Years 15 Years 20 Years Impact of Inflation Impact of 5% yearly inflation on expenses
  5. 5. ₹ 100,000 ₹ 80,000 ₹ 50,000 ₹ 35,000 Today 5 Years 15 Years 20 Years Impact of 5% yearly inflation on Savings What does inflation do to your savings?
  6. 6. • Start Saving … earlier you start the better • Progress from a Saving to Investing • Put money to work rather than accumulating or keeping it idle • You work hard to earn money … So, make the money work hard for you • Benefit from the Power of Compounding Solution? Investing - the safeguard against inflation
  7. 7. DETERMINE WHAT ARE YOU INVESTING FOR? Goal based investing
  9. 9. Fight INFLATION for you Provide INCOME when you need it Be ACCESSIBLE and USABLE in parts and portions GROW in value and appreciate over time Be REALISABLE at fair value and low cost Proper Asset Allocation is the answer Make your investments work for you
  10. 10. Asset Allocation is like a balanced thali … What is Asset Allocation ?
  11. 11. Investments that Grow in Value Investments that Generate Income Property Bonds Gold NSC/KVP Art Collection PPF Equity Shares Bank / Company Deposits Mutual Funds Mutual Funds Are you investing in the right assets? Asset Allocation should match your needs
  12. 12. Mutual Funds
  13. 13. • A mutual fund is the trust that pools the savings of a number of investors who share a common financial goal. • Anybody with an investible surplus of as little as a few hundred rupees can invest in Mutual Funds. • Money collected is invested by a professional fund manager in different types of securities. • Securities could range from shares to debenture, from Government Bond to money market instruments, depending upon the scheme’s stated objective. • Mutual Fund investment gives the market returns and not assured returns. • In the long term market returns have the potential to perform better than other assured return products. • Investment in Mutual Fund is the most cost efficient as it offers the lowest charge to the investor What is a Mutual Fund?
  14. 14. RETURNS INVESTORS STOCKS / SECURITIES FUND MANAGER Invest in Helps generate Delivered to Pool their money How does a Mutual Fund work?
  15. 15. RISK DIVERSIFICATION Professional Management Transparency Liquidity Well- Regulated by SEBI Convenient (Invest Small Amounts) Low Cost Why invest in Mutual Funds?
  16. 16. Mutual Fund Structure & Scheme Categories
  17. 17. Asset Management Company Mutual Fund Trustees Sponsors Custodian Registrar & Transfer Agency Mutual Fund is established as a Trust under Indian Trust Act, 1882 Execute a Trust Deed to form a trust Fund Accountants Agents/ Distributors Bankers Investment Management & Day-to-day Operations Investors Structure of Mutual Fund at a glance …
  18. 18. Organisational Structure Management of Portfolio Investment Objective Investment Portfolio Other Fund Types Active Funds Close Ended Funds Interval Funds Open Ended Funds Passive Funds Income Funds Hybrid Funds Growth Funds Equity Funds Debt Funds Hybrid Funds Liquid Funds Exchange Traded Funds (ETF) Gold ETF ELSS Retirement / Pension Scheme Overseas Funds Fund of Funds Types of Mutual Funds Organisational Structure Active Funds Close Ended Funds Interval Funds Open Ended Funds Passive Funds Income Funds Growth Funds
  19. 19. As per SEBI guidelines on Categorization and Rationalization of schemes issued in October 2017, mutual fund schemes are classified as – 1. Equity Schemes 2. Debt Schemes 3. Hybrid Schemes 4. Solution Oriented Schemes – For Retirement and Children 5. Other Schemes – Index Funds & ETFs and Fund of Funds • Under Equity category, Large, Mid and Small cap stocks have now been defined. • Naming convention of the schemes, especially debt schemes, as per the risk level of underlying portfolio (e.g., Credit Opportunity Fund is now called Credit Risk Fund) • Balanced / Hybrid funds are further categorised into conservative hybrid fund, balanced hybrid fund and aggressive hybrid fund etc. Categorization of Mutual Fund Schemes
  20. 20. Equity schemes
  21. 21. Invests in equities and equity related instruments of companies Seeking long term growth, but volatile in the short term Suitable for investors with higher risk appetite and longer investment horizon Equity Funds
  22. 22. Multi Cap Fund* • At least 75% investment in equity & equity related instruments :) 25% in Large Cap Companies :) 25% in Mid Cap Companies :) 25% in Small Cap Companies Large Cap Fund • At least 80% investment in large cap stocks Large & Mid Cap Fund • At least 35% investment in large cap stocks and 35% in mid cap stocks Flexi Cap Fund • At least 65% investment in equity & equity related instruments. A scheme investing dynamically across large cap, mid cap, small cap stocks Mid Cap Fund • At least 65% investment in mid cap stocks Small cap Fund • At least 65% investment in small cap stocks * Also referred to as Diversified Equity Funds Equity Funds Categories
  23. 23. Dividend Yield Fund Predominantly invest in dividend yielding stocks, with at least 65% in stocks Value Fund Value investment strategy, with at least 65% in stocks Contra Fund Scheme follows contrarian investment strategy with at least 65% in stocks Focused Fund Focused on the number of stocks (maximum 30) with at least 65% in equity & equity related instruments Sectoral/ Thematic Fund At least 80% investment in stocks of a particular sector/ theme ELSS At least 80% in stocks in accordance with Equity Linked Saving Scheme, 2005, notified by Ministry of Finance Equity Funds
  24. 24. Deduction from taxable income of upto Rs. 1,50,000 under Sec 80C Invests predominantly in equity Shortest lock-in period of 3 years as compared to other tax saving options Equity Linked Savings Scheme (ELSS)
  25. 25. Debt schemes
  26. 26. Invest in different types of fixed income securities Aims to earn interest income and capital appreciation Suitable for investors seeking income at moderate risk Debt Funds
  27. 27. Overnight Fund • Overnight securities having maturity of 1 day Liquid Fund • Debt and money market securities with maturity of u pto 91 days only Ultra Short Duration Fund • Debt & Money Market instruments with Macaulay duration of the portfolio between 3 months - 6 months Low Duration Fund • Investment in Debt & Money Market instruments with Macaulay duration portfolio between 6 months- 12 months Money Market Fund • Investment in Money Market instruments having maturity upto 1 Year Short Duration Fund • Investment in Debt & Money Market instruments with Macaulay duration of the portfolio between 1 year - 3 years Debt Funds Categories
  28. 28. Medium Duration Fund • Investment in Debt & Money Market instruments with Macaulay duration of portfolio between 3 years - 4 years Medium to Long Duration Fund • Investment in Debt & Money Market instruments with Macaulay duration of the portfolio between 4 - 7 years Long Duration Fund • Investment in Debt & Money Market Instruments with Macaulay duration of the portfolio greater than 7 years Dynamic Bond • Investment across duration Corporate Bond Fund • Minimum 80% investment in corporate bonds only in AA+ and above rated corporate bonds Credit Risk Fund • Minimum 65% investment in corporate bonds, only in AA and below rated corporate bonds Debt Funds
  29. 29. Banking and PSU Fund • Minimum 80% in Debt instruments of banks, Public Sector Undertakings, Public Financial Institutions and Municipal Bonds Gilt Fund • Minimum 80% in G-secs, across maturity Gilt Fund with 10 year constant Duration • Minimum 80% in G-secs, such that the Macaulay duration of the portfolio is equal to 10 years Floater Fund • Minimum 65% in floating rate instruments (including fixed rate instruments converted to floating rate exposures using swaps/ derivatives) Debt Funds
  30. 30. Hybrid schemes
  31. 31. Invest in a mix of equities and debt Gain from a healthy dose of equities but the debt portion fortifies them against any downturn Ideal for investors who are looking for a mixture of safety, income and modest capital appreciation Hybrid Funds
  32. 32. SEBI has classified Hybrid funds into 7 sub-categories as follows: Conservative Hybrid Fund • 10% to 25% investment in equity & equity related instruments; and • 75% to 90% in Debt instruments Balanced Hybrid Fund • 40% to 60% investment in equity & equity related instruments; and • 40% to 60% in Debt instruments Aggressive Hybrid Fund • 65% to 80% investment in equity & equity related instruments; and • 20% to 35% in Debt instruments Dynamic Asset Allocation or Balanced Advantage • Investment in equity/ debt that is managed dynamically (0% to 100% in equity & equity related instruments; and • 0% to 100% in Debt instruments) Multi Asset Allocation • Investment in at least 3 asset classes with a minimum allocation of at least 10% in each asset class Arbitrage Fund • Scheme following arbitrage strategy, with minimum 65% investment in equity & equity related instruments Equity Savings • Equity and equity related instruments (min.65%); • debt instruments (min.10%) and • derivatives (min. for hedging to be specified in the SID) Hybrid Funds
  33. 33. Solution-oriented & Other schemes
  34. 34. Retirement Funds • Lock-in for at least 5 years or till retirement age whichever is earlier Children’s Funds • Lock-in for at least 5 years or till the child attains age of majority whichever is earlier Index Funds/ ETFs • Minimum 95% investment in securities of a particular index Fund of Funds (Overseas/ Domestic) • Minimum 95% investment in the underlying fund Solution Oriented & Other Schemes
  35. 35. Portfolio replicates the index Aims to provide returns in line with index Suitable for investors seeking returns similar to index Index Funds
  36. 36. • Index funds create a portfolio that mirrors a market index • The securities included in the portfolio and their weights are the same as that in the index • The fund manager does not rebalance the portfolio based on their view of the market or sector • The fund offers the same return and risk represented by the index it tracks • The fees that an index fund can charge is capped at 1.5% • Investors have the comfort of knowing the stocks that will form part of the portfolio, since the composition of the index is known. Index Funds
  37. 37. • An ETF is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. • Unlike regular mutual funds, an ETF trades like a common stock on a stock exchange. The traded price of an ETF changes throughout the day like any other stock, as it is bought and sold on the stock exchange. • ETFs are passively managed, which means that the fund manager makes only minor, periodic adjustments to keep the fund in line with its index. • Rather than investing in an ‘active’ fund managed by a fund manager, when you buy units of an ETF you're harnessing the power of the market itself. • Because an ETF tracks an index without trying to outperform it, it incurs lower administrative costs than actively managed portfolios. Exchange Traded Funds (ETFs)
  38. 38. • Gold ETF is a open ended scheme which invest pure physical gold bullion of 99.5 per cent purity. The scheme may also invest gold related instruments approved by SEBI and Gold Deposit Scheme of banks up to 20% of net assets • Gold ETFs issue units against gold held in the portfolio. Each unit represents a defined weight in gold, typically one gram. • The price of Gold ETF unit moves in line with the domestic price of gold. • Gold ETF are benchmarked against the price of gold. • Gold ETFs are considered as non-equity mutual funds for the purpose of taxation. ⁻ Eligible for long-term capital gains benefits if held for 3 years ⁻ No wealth tax is applicable on Units of Gold ETFs Gold Exchange Traded Funds
  39. 39. • International funds enable investments in markets outside India, by holding in their portfolio one or more of the following: • Equity of companies listed abroad. • ADRs and GDRs of Indian companies. • Debt of companies listed abroad. • ETFs of other countries. • Units of passive index funds in other countries. • Units of actively managed mutual funds in other countries. • International equity funds may also hold some of their portfolios in Indian equity or debt. • They can hold some portion of the portfolio in money market instruments to manage liquidity. International Funds
  40. 40. • Fund of funds are mutual fund schemes that invest in the units of other schemes of the same mutual fund or other mutual funds (Hence FoF is also known as multi-manager fund). • Its portfolio contains Units of different underlying mutual fund scheme in which the FoF has invested. • The FoF will have two levels of expenses – a) that of the scheme whose units the FoF invests in and b) the expense of the FoF itself • SEBI Mutual Funds Regulations have capped the total expenses that can be charged across both levels • FoF provide benefit of risk diversification and portfolio diversification with small amounts of investment. Fund of Funds (FoF)
  41. 41. • “Arbitrage” is the simultaneous purchase and sale of an asset to take advantage of the price differential in the two markets and profit from price difference of the asset on different markets or in different forms. • Arbitrage fund buys a stock in the cash market and simultaneously sells it in the Futures market at a higher price to generate returns from the difference in the price of the security in the two markets. The fund takes equal but opposite positions in both the markets, thereby locking in the difference. The positions have to be held until expiry of the derivative cycle and both positions need to be closed at the same price to realize the difference. • The cash market price converges with the futures market price at the end of the contract period. Thus it delivers risk-free profit for the investor/trader. • Price movements do not affect initial price differential because the profit in one market is set-off by the loss in the other market. • Hence, Arbitrage funds are a good choice for cautious investors who want to benefit from a volatile market without taking on too much risk. Arbitrage Funds
  42. 42. Risk Return Type of Scheme Higher Risk Higher Returns Equity Schemes Moderate Risk Moderate Returns Hybrid Schemes Low - Moderate Risk Low - Moderate Returns Debt Schemes Very Low Risk Lower Returns Liquids Schemes …. a matter of Risk Return Trade-Off Mutual Fund Scheme - Which one to buy?
  43. 43. Overnight Funds Liquid Funds Ultra Short Term Funds Short Term Funds Gilt & Bond Funds Debt-oriented Hybrid Equity-oriented Hybrid Equity Savings Funds Large Cap Funds Diversified Funds Mid Cap Funds Sectoral Funds Debt Equity >>Return<< >>Return<< >>Risk<< Low Med High Low Med High >>Risk<< Risk / Return Hierarchy
  44. 44. Scheme Related Documents
  45. 45. • Scheme information document (SID) • SID contains information that is specific to a each MF scheme. • Concise & detailed information that a prospective investor should know so as to take an informed decision to invest • Statement of Additional Information(SAI) • SAI contains information with regards to each mutual fund and is common across all schemes of a mutual fund. • Key Information Memorandum (KIM) • Abridged version of SID • Simple to understand and contains key / essential information that investors need to be aware about before they invest One must read & understand scheme related documents before investing in a mutual fund scheme. Scheme Related Documents
  46. 46. • Fact sheets help you assess a scheme and keep track of its performance • Issued every month • Easy to understand and provides a snapshot of the scheme • Show following key information at a glance: • NAV • Returns • Fund Managers managing the portfolio • Riskometer • Other statistics allowing investors to compare mutual funds and decide which ones to invest in. Fact sheet is like a score card Factsheet
  47. 47. Plans & Options
  48. 48. • All MF schemes offer a Direct Plan and Regular Plan for investments • You can invest – • DIRECTLY i.e., without involving or routing the investment through any distributor/agent in a ‘Direct Plan’ OR • Through / with the help of a Mutual Fund agent/distributor in a Regular Plan • Direct Plan has a separate NAV, which is higher than the normal “Regular” Plan’s NAV. • Direct Plan has lower expense ratio as there is no distributor/agent involved Direct Plans & Regular Plans
  49. 49. • Growth Option • Capital appreciation in the investment are ploughed back in the scheme and are reflected in increase in the NAV. • Investors do not receive any periodic payments. • Suitable for investors who do not require regular income. • Tax efficient • Dividend Option • Capital appreciation in the investment are paid / distributed to the investors by way of dividend, periodically. • Dividend payment is subject to availability of distributable surplus in the MF scheme. • On dividend payment NAV of the scheme drops. • Dividends are tax-free in the hands of investors but are subject to levy of Dividend Distribution Tax (DDT). • Suitable for investors who require income cash flow. • Under Dividend Reinvestment sub-option, the dividend proceeds are reinvested in the same scheme and additional units are allotted. Growth Option & Dividend Option
  50. 50. Lumpsum Investment – Initial + Additional Systematic Investment Plan (SIP) Systematic Transfer Plan (STP) Inter Scheme Switches Mode of Investing
  51. 51. SIP STP SWP Tools for smart investing
  52. 52. What’s Inside- Systematic Investment Plan (SIP) - It is not necessary that one has to “Start big” to “End big” SIP/SWP/STP – Tax aspect SIP/SWP/STP – Effective retirement planning Systematic Withdrawal Plan (SWP) – It can be used as a source of regular cash flow Systematic Transfer Plan (STP) - It is not difficult to invest a large sum even “in volatile market”
  53. 53. Systematic Investment Plan (SIP): What is the basic mantra It is not necessary that one has to “Start big” to “End big”
  54. 54. SIP: Your friend in need A disciplined way of investing in mutual funds and works on the basic principle of regular investment What is it It is not necessary to start the SIP with a large amount. It can be started with as low as ₹ 1000 What is the minimum Investment amount It allows a person to invest a predetermined amount for a fixed interval in mutual funds. The amount will be automatically deducted from the bank account on a chosen date How does it work SIP can be done on daily, weekly, monthly, and even quarterly basis What are the frequencies covered
  55. 55. SIP: Advantages It allows you to invest a fixed amount at regular intervals for a specified period which helps in building a portfolio Discipline The average investment cost comes down because investor passes through all phases of the market Rupee cost averaging Transaction cost for investment via SIP is far lower compared with investing directly in equities Lower transaction cost The longer one remains invested higher would be the returns Power of compounding Hassle-free mode of investment as amount gets debited automatically with NACH/ Auto Debit instructions Convenience
  56. 56. SIP: Inflation reduces value of money Assumption: Rate of return is 15% p.a. and inflation rate is @ 7%. To achieve the required corpus through SIP mode To achieve the required corpus by one time investment To achieve the required corpus through SIP mode To achieve the required corpus by one time investment
  57. 57. SIP: Rupee cost averaging SIP eliminates the need for timing the investment It smoothens the impact of market volatility It allows the investor to buy more units at lower price The investor need not worry about how much to invest and when to invest SIP Investor Lump-Sum Investor Month Unit Price Investment Units Purchased Investment Units Purchased 1 106 1,000 9.43 12,000 113.21 2 95 1,000 10.53 3 94 1,000 10.64 4 104 1,000 9.62 5 104 1,000 9.62 6 90 1,000 11.11 7 99 1,000 10.10 8 101 1,000 9.90 9 92 1,000 10.87 10 90 1,000 11.11 11 108 1,000 9.26 12 108 1,000 9.26 SIP Investor Lump-Sum Investor Total Investment 12,000 12,000 Total units purchased 121.44 113.21 Average unit price 98.81 106 Value after 9 months 13,115.70 12,226.42 Difference 889.28 At the end of 12 months, total units purchased under SIP mode will be 121.44 & cost per unit will be ₹ 98.81. Thus, the profit for an SIP investor from the above investment will amount to ₹ 889.28 (₹ 13,115.70 – ₹ 12,226.42) Assumption: In first case, ₹ 1000 is invested every month for 12 months through SIP mode while in other ₹ 12,000 is invested as a lumpsum.
  58. 58. SIP: Power of compounding Albert Einstein regarded Compound interest as the 8th wonder of the world He famously advised that those who understand its power, earn through it and those who do not, end up paying it Amount Invested (per month) – ₹ 1,000 Amount Invested (per month) – ₹ 1,000 Time period – 30 years Time period – 35 years Return – 12% pa Return – 12% pa Total amount invested – ₹ 3,60,000 Total amount invested – ₹ 4,20,000 Maturity Value – ₹ 35.29 lakh Maturity Value – ₹ 64.95 lakh Compounding is a true companion of an investor who is disciplined. It is superior to simple interest as it earns interest on interest Assumption: Rate or return in either case is 12%. ₹ 1000 is invested every month. In the first case investment period if 30 years while in second it is 35 years
  59. 59. SIP: Start early to create a larger corpus The table above shows the maturity values for the monthly SIP of ₹ 1,000 at 12% for different time periods. The more time one spends in the market, the maturity value of the investment increases proportionately. As the graph suggests, for a 5-year SIP, the final value is 1.4 times of the principal invested. Whereas it is 6.3 times for a period of 25 years SIPs have been one of the best investment strategies to reap long-term equity investment gains Assumption: Rate of return in this case is assumed to be 12% 60,000 120,000 180,000 240,000 300,000 82,486 232,339 504,576 999,148 1,897,635 0 500,000 1,000,000 1,500,000 2,000,000 5 10 15 20 25 IN RS. Amount invested (in Rs.) Maturity value (in Rs.) 1.4 times 1.9 times 2.8 times 4.2 times 6.3 times
  60. 60. Systematic Transfer Plan (STP): What is the basic mantra It is not that difficult to invest a large corpus even “in a volatile market”
  61. 61. STP: Understanding the basics What is it STP refers to Systematic Transfer Plan whereby an investor is able to invest lump sum amount in a scheme and regularly transfer a fixed or variable amount into another scheme When does it make sense When markets are volatile it makes sense to start an STP from debt to equity fund instead of doing an one time investment in an equity oriented fund How does it work An investor invests a lump sum amount in one scheme, usually a low-risk fund, and regularly transfers a pre-defined amount into another scheme for long- term wealth creation What should be kept in mind It is a risk mitigation strategy and thus the objective is not to maximize profit but to optimize returns
  62. 62. STP: Typical approach Transfer n Transfer 1 Value of Fund A decreasing over time Value of Fund B increasing over time Fund A Fund B
  63. 63. STP: Types and when it can be used Fixed STP Capital appreciation STP Both the strategies can be used by the investor depending upon the requirement ▪ In fixed mode, the systematic transfer amount remains consistent ▪ Irrespective of the overall market conditions, a fixed amount is invested in the second fund ▪ This mode is normally used when investment is transferred from low- risk debt to equity funds ▪ In capital appreciation mode, the initial lump sum amount that is invested say in a debt fund remains consistent ▪ The capital appreciation part is transferred to the second fund say an equity fund ▪ This strategy works for the conservative investor who wants to protect the capital and take some risk with the returns
  64. 64. STP: Final thoughts Understanding the asset classes and overall markets Disciplined investing Risk mitigation strategy Systematic transfer plan is a risk mitigation strategy which will protect the investor from any adverse loss but also cap the returns to some extent STP like SIP will only yield the desired result if the investor remains committed to the objective and does not break the investment based on short-term market movement The investor should also understand the asset classes to some extent and where they currently stand. When the equity market is at its peak, it would be unwise to transfer the fund from debt to equity, similarly when the markets are close to their multi-year lows, it would be counter productive to transfer the funds from equity to debt 03 01 02
  65. 65. Systematic Withdrawal Plan (SWP): What is the basic mantra It can be used as a source of regular cash flow
  66. 66. SWP: Understanding the basics What is it It is technically the reverse of SIP wherein one invests a lump sum at the beginning and withdraws a fixed amount at regular intervals to generate regular cash flow. It can be started in equity, debt or hybrid funds How does it work The mechanism is just like SIP. An investor needs to instruct the asset management company (AMC) to redeem units on a predetermined date and credit a fixed sum into the bank account. The fund’s value and number of units will reduce to the extent of each withdrawal What is the frequency of payouts The frequency is generally monthly or quarterly. It can also be semi-annual or annual depending upon the need of the investor What should one keep in mind The investor should try to Increase the withdrawal amount every year to beat inflation
  67. 67. SWP: Advantages Taxation Partial redemption Averages out the market Regular Cash Flow It provides regular cash flow to the investor. It is very effective financial tool for those looking for fixed source of income every month, like elderly citizens Rupee cost averaging helps the investor in SWP plan as well. In a rising market, the investor takes advantage of the averaging out with each redemption Withdrawal through SWP route is taxable @ 15% incase of short term capital gain and Nil incase of long term capital gain if the capital gain amount is less than Rs. 1 lakh per financial year. SWP does not require redemption of entire investment and investor can take care of his/her financial need by partial redemption every month systematically without doing any paperwork
  68. 68. SWP: Types and when it can be used Fixed SWP Capital appreciation SWP Both the strategies can be used by the investor depending upon requirement ▪ In fixed mode, the systematic withdrawal amount remains consistent ▪ Irrespective of the overall market conditions, a fixed amount is credited in the bank account ▪ This mode is important when steady flow of income is the requirement ▪ In capital appreciation mode, the initial lump sum amount remains consistent ▪ The payout is the capital appreciation that is made due to the performance of the fund ▪ Since the payout depends upon the market, this mode is important when the initial corpus is more important then the monthly flow of income
  69. 69. SWP: Effective usage in different scenario Retirement Planning ▪ Investment in a debt oriented mutual fund along with other instruments like bank FD ▪ Regular payouts to supplement regular income Investment Strategy ▪ Bonus or one time payout can be invested in a liquid or ultra short term mutual fund ▪ This amount can then be used for the next six or 12 months Start-up ▪ Everyone wants to be an entrepreneur. But before quitting job, regular source of income is very important ▪ SWP is idle for this and one can invest in debt mutual fund
  70. 70. SIP SWP STP: Taxation Investment Type Comment Description SIP Every installment considered as fresh investment ▪ Each investment has to be held for at least 12 months to be eligible for LTCG benefits SWP Investment is actually redeemed at particular interval ▪ If the amount is withdrawn from Debt mutual fund - ▪ Investment is held for <3 year, tax as per the investor's tax slab ▪ Investment is held for > 3 year, 10% without indexation and 20% with indexation ▪ If the amount is withdrawn from Equity mutual fund - ▪ LTCG is NIL* if investment is held for > 1 year STP Investment moving from debt mutual fund to equity mutual fund ▪ If the source fund is Debt mutual fund - ▪ Investment is held for <3 year, tax as per the investor's tax slab ▪ Investment is held for > 3 year, 10% without indexation and 20% with indexation ▪ If the source fund is Equity mutual fund - ▪ LTCG is NIL* if investment is held for > 1 year * Income-tax at the rate of 10% (without indexation benefit) to be levied on long-term capital gains exceeding Rs. 1 lakh provided transfer of such units is subject to STT plus applicable charges.
  71. 71. SIP SWP STP: Retirement Planning Using SIP/STP/SWP effectively for retirement planning ✓ Start investment in equities early through SIP ✓ Starting early will help in accumulating retirement corpus with lower monthly investment ✓ SIP gives benefit from market volatility and accounts for “rupee cost averaging” Smart Investor Pre-Retirement Post-Retirement ✓ Post retirement, the entire retirement corpus is in debt mutual fund due to the STP option ✓ Instead of redeeming the entire corpus at one go, the retired individual can withdraw amount equivalent to their household needs through SWP option ✓ SWP allows regular income during retirement through regular withdrawal and also some returns as the balanced corpus remains invested in debt mutual fund ✓ Investments done in equity mutual funds should be transferred systematically into debt mutual funds when retirement approaches ✓ It is necessary to reduce risk and can easily be done through STP ✓ Through STP, predefined amount will be transferred from equity scheme to debt scheme of the same fund house SIP STP SWP
  72. 72. SIP SWP STP: Recap SIP In Systematic Investment Plan, a fixed sum of money is debited from one’s bank account at a predefined frequency (weekly, bi-monthly, monthly etc.) and invested in a mutual fund STP In Systematic Transfer Plan, a fixed sum of money is transferred from source mutual fund (where the amount is already invested upfront) to target mutual fund at predefined frequency on a specified date Mutual Fund Bank Target Scheme Source Scheme SWP In Systematic Withdrawal Plan, a fixed sum of money is withdrawn from one’s mutual fund statement at a predefined frequency (normally monthly) Bank Mutual Fund SIP ✓ Rupee cost averaging ✓ Compounding ✓ Allows regular investment SWP ✓ Works well in both rising and falling market conditions ✓ Meets short term objective STP ✓ Rupee cost averaging in rising market ✓ Helps in retirement planning Advantages
  74. 74. Pre-requisites 1. KYC (Know Your Customer) Process 2. PAN Card 3. Bank Account Steps to complete KYC Process Visit any MF Branch Investor Service Centre / Branch with required KYC Documents, namely – i. Address Proof → Aadhaar Card, Passport, Tel. bill etc. ii. Identity Proof → PAN Card, Aadhaar Card, Passport, Voter’s card etc. Submit Completed KYC form with photograph with required documents After completing KYC, you can open a MF Folio with any Mutual Fund and start investing . Steps for Investing in Mutual Funds
  75. 75. 📝Physical Mode✍🏻 (Traditional / Paper based ) and On-line Mode Modes of Investing
  76. 76. • One can invest in a Mutual Fund scheme Offline or Online • Offline (physical application) mode • Duly completed scheme application form signed by all applicants • Cheque or bank draft for the amount to be invested • Submit the above at the branch office or designated Investor Service Centres (ISC) of mutual funds or Registrar & Transfer Agents & MFU • Online mode • Websites of the respective Mutual Funds • Websites of Mutual Fund Distributors • Buy mutual funds units through NSE – MFSS and BSE - StAR MF just like a company stock • MF Utilities (MFU) a technology based shared service platform for MF transactions promoted by the mutual fund industry for participating mutual funds. How to invest in a Mutual Fund Scheme?
  77. 77. • Withdrawing your money from Mutual Fund scheme is called as Redemption or Repurchase • You can withdraw full or partial amount or even a specific number of units • Offline mode to redeem your mutual fund investments • Unit holder needs to submit a duly filled and signed Redemption Request form to the AMC's or the Registrar’s designated office • All holders have to sign the Redemption form • The proceeds from the redemption will be credited to the registered bank account of the first named unit holder • Online mode to redeem your mutual fund investments • Log-on to the ‘Online Transaction’ page of the desired Mutual Fund • Select the Scheme and the number of units (or the amount) you wish to redeem and confirm your transaction. How to withdraw your money?
  78. 78. • A mutual fund provides relative return, with respect to its benchmark. • Returns have to always be seen in comparison with a fund’s benchmark • Appropriate benchmarks should be used to evaluate a fund’s performance • The return of a fund should be measured over a period of time, representative of recommended holding period and objectives of the fund • Debt funds are held for shorter periods • Equity funds are held for longer periods • The return of the fund has to be adjusted for the risk it has assumed to generate the return. • Higher return with higher than proportionate risk, is a case of underperformance, compared to a fund with higher return at lower risk Performance Evaluation Principles
  79. 79. • The NAV (net asset value) is the market value of all the funds investments less liabilities and expenses, divided by outstanding number of units for the firm. • NAV is important as it is the basis for valuing an investor’s holding of units in a mutual fund, and the relative appreciation of the same • Mutual Fund NAVs are published daily on AMFI’s website, Mutual Fund Websites, leading newspapers, etc. What is NAV?
  80. 80. • Mutual funds are required to ‘Label’ their schemes on the following parameters: • Nature of scheme in an indicative time horizon (short/medium/long term) • A brief about the investment objective (in a single line sentence) followed by kind of product in which investor is investing (Equity/Debt). • Level of risk, depicted by ‘Riskometer’ as under: • Low - principal at low risk • Low to Moderate - principal at low to moderate risk • Moderate - principal at moderate risk • Moderately High -- principal at moderately high risk • High - principal at high risk • Very High – principal at very high risk • A disclaimer saying: “Investors should consult their financial advisers if they are not clear about the suitability of the product.” Product Labelling
  81. 81. • Facility that enables an individual unitholder (including sole proprietor of sole proprietary concern) to nominate a person, who can claim the Units held by the unitholder or the redemption proceeds thereof in the event of death the unitholder. • If the Units are held jointly by more than one person, all joint unit holders are required to together nominate a person in whom all the rights in the units would vest in the event of death of all the joint unit holders. • Nomination can be made either at the time of initial application for purchase of Units or subsequently. • Nomination once made can be changed subsequently any time and any number of times. Nomination
  82. 82. • In case nomination is not made by a Unitholder, the Units would be transmitted to the account of legal heir(s), depending whether the deceased person has left behind a Will and as per applicable succession law, which involves lengthy (and sometimes expensive & cumbersome) procedure. • Nomination is a simpler and inexpensive way to make things easy for one’s near and dear ones to claim the money in your mutual fund folio, demat account or bank account expeditiously, through minimal paper after one’s death. • To claim the Units after the death of a unitholder, the nominee has to complete the necessary formalities, such as completion of KYC process, along with proof of death of the unit holder, signature of the nominee duly attested, furnishing of proof of guardianship in case the nominee is a minor, and such other document as may be required for transmitting the units in favour of the nominee(s). Why is Nomination important?
  83. 83. Complaint to Mutual Fund • Contact the Investor Relations Officer of the Mutual Fund • Name and contact details of the Investor Relations Officer are available in the Scheme Information Document and also on the website of the concerned mutual fund. Complaints Redressal Mechanism
  84. 84. SEBI has provided a centralized web based complaints redress system on its portal, named 'SCORES’. If you are not satisfied with the response from a particular Mutual Fund/company/intermediary, you may then lodge an online complaint with SEBI through SCORES to get your complaint redressed. SEBI takes up the complaints registered via SCORES with the concerned company / mutual fund / intermediary for timely redressal. To log on to SCORES System, please visit http://scores.gov.in/ SEBI Complaints Redress System
  85. 85. 88 Thank You
  86. 86. “Visit here https://licmf.info/KYCredressal to learn more about KYC requirements, SEBI Registered Mutual Funds and Grievance redressal.”