01. What is a Mutual Fund ?
Why it is Called a Pass Through Vehicle ?
MODELEXAM
Published on 12 May 2017
SUBSCRIBED 12K
A Mutual Fund is a 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.
These investors buy units of a particular Mutual Fund scheme that has a defined investment
objective and strategy.
The money thus collected is then invested by the fund manager in different types of securities.
These could range from shares to debentures to money market instruments, depending upon the
scheme’s stated objectives.
The income earned through these investments and the capital
appreciation realized by the scheme is shared by its unit in proportion to the number of units owned
by them.
Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity
to invest in a diversified, professionally managed basket of securities at a relatively
low-cost.
02. 3-tier Structure of Mutual Funds & other MF
Constituents
19,467 views
Published on 3 Jul 2018
Sponsor is the Promoter of Mutual Fund
Seeks SEBI Registration for starting MF
5 years in Financial Services Business
Profit making in 3 out of last 5 years
Minimum 40% share-holding in AMC
Positive Net Worth in last 5 years
Indian / Foreign Sponsor, Joint Venture
Trust – MF in India is a Trust.
Minimum 4 trustees & two-thirds of the trustees - independent trustees
SEBI Approval required, before a person is appointed as Trustee
Person convicted of any economic offence or violation of any securities laws cannot be appointed as
trustee
AMC – Day to Day operations of Mutual Fund
50% Independent directors.
Trustee Approval required before a person is appointed as a Director
Minimum net worth of Rs. 50 crore
AMC can’t invest in its own schemes.
Can be terminated by a majority of the trustees, or by 75% of the Unit-holders
Chief Investment Officer (CIO) is responsible for overall investments. Fund managers assist the CIO
Securities Analysts – Fundamental & Technical Analysis for stock picking.
Securities Dealer – Order Execution
Chief Marketing Officer (CMO)
Chief Operations Officer handles all operational issues.
Compliance Officer - Legal Compliances. Signs a due-diligence certificate in OD of New Issues.
Compliance Officer reports to head of the AMC & works closely with Trustees on compliance &
regulatory issues.
Custodian – Custody of assets
Settlement of Security Transactions
SEBI registered, appointed by Trustee
Custodial Agreement with Trustee
Tracks dividends, bonus & rights of companies in the portfolio
Normally Independent of Sponsor
RTA – Registrar & Transfer Agents
Maintains investor records
Offices of RTA – ISC (Investor Service Centres)
Appointed by AMC. (Optional). Can be In-House also
All RTAs need to register with SEBI
Auditors – Scheme & AMC
Scheme Auditor Appointed by Trustee
AMC Auditor appointed by AMC
Fund Accountant – Calculation & Disclosure of NAV.
Equity & balanced fund NAV upto 2 decimal places.
Index & Debt Funds NAV – upto 4 Decimals.
Daily night 9 pm in AMFI Site.
FoF – By 10 am next day
03. Mutual Fund Terminologies –
NFO, SIP, SWP, STP, SWITCH, Redemption, Folio
Mutual Fund Terms
NFO - New Fund Offer
STP Systematic Transfer Plan
SWP Systematic Withdrawal Plan
Switch - Switching from one fund to another,
Folio - Account number for investor
Redemption - Withdrawal
04. Debt Mutual Funds ? Types
MODELEXAM
Published on 5 Jul 2018
SUBSCRIBED 12K
Debt Mutual Funds Invest in Bonds / Debentures
Bonds have a Fixed Maturity
Bonds Pay Coupon or Interest
Government / Corporate Bonds etc
Short / Medium / Long Term etc
Overnight Fund - Securities having maturity of 1 day
Liquid Fund - maturity of upto 91 days only
Ultra Short Duration - Macaulay duration of the portfolio is between 3 months - 6 months
Low Duration - Macaulay duration of the portfolio is between 6 months- 12 months
Money Market - Money Market instruments having maturity upto 1 year
Short Duration - Macaulay duration of the portfolio is between 1 year – 3 years
Medium Duration - Macaulay duration of the portfolio is between 3 years – 4 years
Medium to Long Duration - Macaulay duration of the portfolio is between 4 – 7 years
Long Duration - Macaulay duration of the portfolio is greater than 7 years
Dynamic Bond - Investment across Duration
Corporate Bond Fund - 80% of total assets in AA+ rating
Credit Risk Fund - 65% of total assets in AA and below rating
Banking & PSU Fund - Bonds of banks, PSU, Public Financial Institutions, Municipal Bonds- 80% of
total assets
Gilt Fund - Gsecs- 80% of total assets
Gilt Fund – 10 year Constant Duration 80% of total assets such that Macaulay duration of the
portfolio is equal to 10 years
Floater Fund - investment in floating rate instruments- 65% of total assets
05. Equity Mutual Funds (New Category)
MODELEXAM
Published on 27 Jun 2018
SUBSCRIBED 12K
Large Cap Fund - Minimum investment in equity &equity related instruments of largecap companies-
80% of total assets.
Large Cap Companies - 1st -100th company in terms of full market capital.
Mid Cap Fund - Minimum investment in equity & equity related instruments of midcap companies-
65% of total assets.
Mid Cap Companies - 101st -250th company in terms of full market capital.
Small Cap Fund - Minimum investment in equity & equity related instruments of small cap
companies- 65% of total assets.
Small Cap Companies - 251st company onwards in full market capital.
Large & Mid Cap Fund - Large Cap Stocks – 35% of total assets. Mid Cap Stocks – 35% of total assets.
Multi Cap Fund - Investing across large cap, mid cap,small cap stocks. Minimum 65% in Equity.
Large & Mid Cap Fund - Large Cap Stocks – 35% of total assets. Mid Cap Stocks – 35% of total assets.
Multi Cap Fund - Investing across large cap, mid cap, small cap stocks. Minimum 65% in Equity.
Focused Fund - Minimum 65% in Equity. Max 30 stocks in the portfolio.
Sector / Thematic Fund – Minimum 80% in stocks of that Particular Sector or of that particular
theme. High Risk in Riskometer.
Dividend Yield Fund - Minimum 65% in Equity. Mainly in Dividend Yield Stocks.
06. Hybrid Mutual fund Schemes ? (Types)
MODELEXAM
Published on 5 Jul 2018
SUBSCRIBED 12K
Conservative – Equity 10 to 25%, Debt – 75 to 90%
Balanced – Equity 40 to 60%, Debt 40 to 60%. No Arbitrage
Aggressive – Equity 65 to 80%, Debt 20 to 35%
Dynamic Asset Allocaion of Balanced Advantage Fund (BAF)
Multi Asset Allocation
3 different asset classes
Minimum 10% in each asset class.
Eg. Equity 10%, Debt 10%, Gold 10%
Equity Savings
Min Equity 65%
Min Debt 10%
Hedging & Arbitraging is allowed
NAV of Mutual Fund? Sale Price & Repurchase Price
MODELEXAM
Published on 17 May 2017
SUBSCRIBED 12K
Net Asset Value (NAV) – Current market price of the unit.
Sale Price Is the price you pay when you invest in a scheme. Also called as Offer Price.
Sale Price – NAV = Entry Load
Repurchase Price is the Price at which units are repurchased / Redeemed by the Mutual Fund.
NAV – Repurchase Price = Exit Load
Dividend Distribution Tax for Mutual Funds
Individual / HUF
Equity 10%
Non-Equity 25%
Infrastructure Debt Scheme 25% (*5% for NRI )
Corporate
Equity 10%
Non-Equity 30%
Infrastructure Debt Scheme 30%
Long Term Capital Gains Tax on Mutual Funds
Published on 4 Jul 2018
SUBSCRIBED 12K
LTCG Tax – Non Equity - INDEXATION
Indexation is Adjusting the Purchase Cost for Inflation
Inflation Numbers are taken from CII
CII – Cost Inflation Index
CII Base Year – 2001-02
Base Value – 100
CII for 2018-19 is 280
Illustration -
Fund – XYZ Ultra Short Term Fund
Investment – Rs 1 Lakh, 18 /7/14. Purchase NAV - 25.
Redemption NAV - 35
Redemption Date – 25/06/18
Calculate LTCG Tax Payable
Number of Units Bought = (1,00,000 / Rs 25) = 4000
Redemption Value = Units X Redemption NAV
Redemption Value = 4000 X 35 = Rs 1,40,000
Profit = Redemption – Indexed Cost
Tax @ 20% for Profit
Indexed Cost = Purchase Price X CII of Year Exit / CII of Year Entry
CII of 2014-15 – 240
CII of 2018-19 – 280
Indexed Cost = 100000 X 280 / 240
Indexed Cost = Rs 1,16,666
Profit = Rs 1,40,000- Rs 1,16,666
Profit = Rs 23,333.33
Tax @ 20% = Rs 4,666
Save Tax Using ELSS Mutual Fund ? |
Equity Linked Savings Scheme
MODELEXAM
Published on 5 Jul 2018
ELSS - Equity Linked Saving Scheme
Min investment – Rs 500
Max Investment – NO Limit
Max tax Benefit – Rs 1.5 Lakhs
Section – 80C
Lock-in – 3 years.
Dividend Payout & Growth
SIP – Yes. SIP – Each installment Locked for 3 years
