Investment

Awareness
for you
What do you do with your money?
What's wrong with just saving?

Inflation eats up your savings over time !!!

What does inflation do to your expenses?

Impact of Inflation

₹ 80,000
₹ 60,000
₹ 40,000
₹ 30,000

Today 5 Years 15 Years 20 Years

Impact of 5% yearly inflation on expenses

What does inflation do to your savings?

₹ 100,000

₹ 80,000

₹ 50,000

₹ 35,000
Today 5 Years 15 Years 20 Years

Impact of 5% yearly inflation on Savings

Solution?
Investing - the safeguard against inflation

• 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

DETERMINE WHAT ARE YOU INVESTING FOR?
Goal based investing
What are the various options?

MUTUAL
FUNDS
GOLD
PROPERTY

STOCKS
INSURANCE

BONDS
BANK DEPOSITS
Make your investments work for you

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

What is Asset Allocation ?

Asset Allocation is like a balanced thali …

Asset Allocation should match your needs
Investments that Investments that
Grow in Value 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?

Mutual Funds
What is a Mutual Fund?

• 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
How does a Mutual Fund work?

Pool their
money
Delivered to
INVESTORS

RETURNS FUND MANAGER

Invest in
Helps generate

STOCKS / SECURITIES
Why invest in Mutual Funds?

Professional
Management

Low Cost Transparency

RISK
DIVERSIFICATION
Convenient
(Invest Small Liquidity
Amounts)
Well-
Regulated by
SEBI
Mutual Fund Structure &
Scheme Categories
Structure of Mutual Fund at a glance …

Execute a Trust Deed

Sponsors to form a trust Trustees

Mutual Fund is established as a Trust under Indian Trust Act, 1882

Investment Asset
Mutual Fund Management
Investors & Day-to-day
Management
Operations Company

Custodian

Registrar &
Agents/ Fund
Bankers Transfer
Distributors Accountants
Agency
Types of Mutual Funds

Organisational
Organisational Management of Investment Investment Other Fund
Structure
Structure Portfolio Objective Portfolio Types

Open
Open Equity Exchange Traded
Growth
Growth Funds (ETF)
Ended
Ended Funds
Active
Active Funds
Funds
Funds
Funds Gold ETF
Funds
Funds
Debt Funds
Close
Close ELSS
Income
Income
Ended
Ended Funds
Funds
Funds
Funds Retirement /
Hybrid Pension Scheme
Funds
Passive
Passive Overseas Funds
Interval
Interval Funds
Funds Hybrid
Funds Liquid
Funds Funds
Funds Fund of Funds
Categorization of Mutual Fund Schemes
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.
Equity schemes
Equity Funds

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 Categories

• At least 75% investment in equity & equity related instruments

:) 25% in Large Cap Companies
Multi Cap Fund* :) 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

• At least 65% investment in equity & equity related instruments. A

Flexi Cap Fund 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

Dividend Yield Predominantly invest in dividend yielding stocks, with at least

Fund 65% in stocks

Value Fund Value investment strategy, with at least 65% in stocks

Scheme follows contrarian investment strategy with at least

Contra Fund 65% in stocks

Focused on the number of stocks (maximum 30) with at least

Focused Fund 65% in equity & equity related instruments

Sectoral/ Thematic At least 80% investment in stocks of a particular sector/

Fund theme

At least 80% in stocks in accordance with Equity Linked

ELSS Saving Scheme, 2005, notified by Ministry of Finance
Equity Linked Savings Scheme (ELSS)

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
Debt schemes
Debt Funds

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 Categories

Overnight Fund • Overnight securities having maturity of 1 day

• Debt and money market securities with maturity of u

Liquid Fund pto 91 days only

• Debt & Money Market instruments with Macaulay

Ultra Short Duration Fund duration of the portfolio between 3 months - 6 months

• Investment in Debt & Money Market instruments with

Low Duration Fund Macaulay duration portfolio between 6 months- 12
months

• Investment in Money Market instruments having

Money Market Fund maturity upto 1 Year
• Investment in Debt & Money Market instruments with
Macaulay duration of the portfolio between 1 year - 3
Short Duration Fund years
Debt Funds

Medium Duration • Investment in Debt & Money Market instruments with Macaulay
duration of portfolio between 3 years - 4 years
Fund
Medium to Long • Investment in Debt & Money Market instruments with Macaulay
duration of the portfolio between 4 - 7 years
Duration Fund
Long Duration • Investment in Debt & Money Market Instruments with Macaulay
duration of the portfolio greater than 7 years
Fund
Dynamic Bond • Investment across duration

Corporate Bond • Minimum 80% investment in corporate bonds only in AA+ and above
rated corporate bonds
Fund
Credit Risk Fund • Minimum 65% investment in corporate bonds, only in AA and below
rated corporate bonds
Debt Funds

• Minimum 80% in Debt instruments of banks, Public

Sector Undertakings, Public Financial Institutions and
Banking and PSU Fund Municipal Bonds

Gilt Fund • Minimum 80% in G-secs, across maturity

Gilt Fund with 10 year • Minimum 80% in G-secs, such that the Macaulay
constant Duration duration of the portfolio is equal to 10 years
• Minimum 65% in floating rate instruments (including
fixed rate instruments converted to floating rate
Floater Fund exposures using swaps/ derivatives)
Hybrid schemes
Hybrid Funds

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

SEBI has classified Hybrid funds into 7 sub-categories as

follows:
Conservative Hybrid • 10% to 25% investment in equity & equity related instruments; and
Fund • 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
• Investment in equity/ debt that is managed dynamically (0% to 100% in equity
Allocation or
& equity related instruments; and
Balanced Advantage • 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)
Solution-oriented
&
Other schemes
Solution Oriented & Other Schemes

• Lock-in for at least 5 years or till retirement

Retirement Funds
age whichever is earlier

• Lock-in for at least 5 years or till the child attains age

Children’s Funds
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
Index Funds

Portfolio replicates the index

Aims to provide returns in line with

index

Suitable for investors seeking returns

similar to index
Index Funds

• 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.
Exchange Traded Funds (ETFs)
• 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.
Gold Exchange Traded Funds
• 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
International Funds
• 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.
Fund of Funds (FoF)

• 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.
Arbitrage Funds
• “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.
Mutual Fund Scheme - Which one to buy?

…. a matter of Risk Return Trade-Off

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

Risk / Return Hierarchy

Debt Debt-oriented Hybrid Equity Sectoral Funds

Mid Cap Funds

>>Return<<
>>Return<<

Gilt & Bond Funds

Diversified Funds
Short Term Funds
Large Cap Funds
Ultra Short Term Funds
Equity-oriented Hybrid
Liquid Funds
Overnight Funds Equity Savings Funds

Low Med High Low Med High

>>Risk<< >>Risk<<
Scheme
Related
Documents
Scheme Related Documents

• 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.
Factsheet
• 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

Plans & Options
Direct Plans & Regular Plans
• 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
Growth Option & Dividend Option

• 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.
Mode of Investing

Lumpsum Investment – Initial + Additional

Systematic Investment Plan (SIP)

Systematic Transfer Plan (STP)

Inter Scheme Switches

 SIP STP SWP
Tools for smart
investing
What’s Inside-

Systematic Investment Plan (SIP) - It is not necessary that one has to “Start big” to “End
big”

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”

SIP/SWP/STP – Tax aspect

SIP/SWP/STP – Effective retirement planning

Systematic Investment Plan (SIP): What is the basic mantra

It is not necessary that one

has to “Start big” to “End
big”
 SIP: Your friend in need

How does it work

What is it It allows a person to invest a predetermined
A disciplined way of investing in amount for a fixed interval in mutual funds.
mutual funds and works on the The amount will be automatically deducted
basic principle of regular from the bank account on a chosen date
investment

What are the frequencies What is the minimum

covered Investment amount
SIP can be done on daily, weekly, It is not necessary to start the SIP
monthly, and even quarterly with a large amount. It can be
basis started with as low as ₹ 1000
SIP: Advantages

Discipline
It allows you to invest a fixed
amount at regular intervals for a
specified period which helps in
Power of compounding
building a portfolio
The longer one remains invested
higher would be the returns
Rupee cost averaging
The average investment cost
comes down because investor
passes through all phases of the
market Convenience
Hassle-free mode of investment
as amount gets debited
automatically with NACH/ Auto
Lower transaction cost Debit instructions
Transaction cost for investment
via SIP is far lower compared with
investing directly in equities
SIP: Inflation reduces value of money

To achieve the
required corpus To achieve the
through SIP required corpus
mode through SIP
mode

To achieve the
required corpus
by one time
investment To achieve the
required corpus
by one time
Assumption: Rate of return is 15% p.a. and inflation rate is @ 7%. investment
SIP: Rupee cost averaging
SIP eliminates the need for timing the investment It allows the investor to buy more units at lower price

It smoothens the impact of market volatility The investor need not worry about how much to invest
and when to invest

SIP Investor Lump-Sum Investor SIP Investor Lump-Sum Investor

Units Units Total Investment 12,000 12,000

Month Unit Price Investment Investment
Purchased Purchased Total units purchased 121.44 113.21

1 106 1,000 9.43 12,000 113.21 Average unit price 98.81 106
2 95 1,000 10.53 Value after 9 months 13,115.70 12,226.42
3 94 1,000 10.64 Difference 889.28
4 104 1,000 9.62
5 104 1,000 9.62
6 90 1,000 11.11 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
7 99 1,000 10.10
from the above investment will amount to ₹ 889.28 (₹ 13,115.70 – ₹
8 101 1,000 9.90
12,226.42)
9 92 1,000 10.87
10 90 1,000 11.11 Assumption: In first case, ₹ 1000 is invested every month for 12 months
11 108 1,000 9.26 through SIP mode while in other ₹ 12,000 is invested as a lumpsum.
12 108 1,000 9.26
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

Assumption: Rate or return in either case is 12%. ₹

Compounding is a true companion of an investor who is disciplined. It is superior to simple 1000 is invested every month. In the first case
investment period if 30 years while in second it is
interest as it earns interest on interest
35 years
 SIP: Start early to create a larger corpus
6.3 times
2,000,000

1,897,635
4.2 times
The more time one spends in the
1,500,000

999,148
2.8 times
market, the maturity value of the
investment increases
1.9 times
IN RS.

1,000,000 proportionately. As the graph

504,576
1.4 times
suggests, for a 5-year SIP, the final

300,000
240,000
232,339
value is 1.4 times of the principal

180,000
120,000
500,000
82,486
60,000

invested. Whereas it is 6.3 times

for a period of 25 years
0
5 10 15 20 25

Amount invested (in Rs.) Maturity value (in Rs.)

The table above shows the maturity values for the monthly SIP of ₹ 1,000 at 12% for different time periods.

Assumption: Rate of return in this case is assumed to be 12%

SIPs have been one of the best investment strategies to reap long-term equity investment gains
Systematic Transfer Plan (STP): What is the basic mantra

It is not that difficult to invest

a large corpus even “in a
volatile market”
STP: Understanding the basics

What is it How does it work

STP refers to Systematic Transfer An investor invests a lump sum
Plan whereby an investor is able amount in one scheme, usually a
to invest lump sum amount in a low-risk fund, and regularly
scheme and regularly transfer a transfers a pre-defined amount
fixed or variable amount into into another scheme for long-
another scheme term wealth creation

When does it make sense What should be kept in mind

When markets are volatile it It is a risk mitigation strategy and
makes sense to start an STP from thus the objective is not to
debt to equity fund instead of maximize profit but to optimize
doing an one time investment in returns
an equity oriented fund
STP: Typical approach

Transfer n

Transfer 1

Value of Fund A Value of Fund B

decreasing over time increasing over time

Fund A Fund B
STP: Types and when it can be used
Fixed STP

Capital appreciation STP

▪ In capital appreciation mode, the

initial lump sum amount that is
▪ In fixed mode, the systematic
invested say in a debt fund remains
transfer amount remains consistent
consistent
▪ Irrespective of the overall market
▪ The capital appreciation part is
conditions, a fixed amount is
transferred to the second fund say
invested in the second fund
an equity fund
▪ This mode is normally used when
▪ This strategy works for the
investment is transferred from low-
conservative investor who wants to
risk debt to equity funds
protect the capital and take some
risk with the returns

Both the strategies can be used by the investor depending upon the requirement
STP: Final thoughts
01 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

02 Disciplined investing
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
Understanding the the markets are close to their multi-year lows, it would be counter
03 asset classes and
overall markets
productive to transfer the funds from equity to debt
Systematic Withdrawal Plan (SWP): What is the basic mantra

It can be used as a source of

regular cash flow
 SWP: Understanding the basics

What should one keep in mind What is the frequency of payouts

The investor should try to Increase the The frequency is generally monthly or
withdrawal amount every year to beat quarterly. It can also be semi-annual or
inflation annual depending upon the need of the
investor

How does it work

What is it
The mechanism is just like SIP. An investor
It is technically the reverse of SIP needs to instruct the asset management
wherein one invests a lump sum at the company (AMC) to redeem units on a
beginning and withdraws a fixed predetermined date and credit a fixed sum
amount at regular intervals to generate into the bank account. The fund’s value
regular cash flow. It can be started in and number of units will reduce to the
equity, debt or hybrid funds extent of each withdrawal
SWP: Advantages

It provides regular cash flow to the investor. It is

very effective financial tool for those looking for
Regular Cash Flow 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
Averages out the market 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
Taxation 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

Partial redemption investment and investor can take care of his/her
financial need by partial redemption every month
systematically without doing any paperwork
SWP: Types and when it can be used
Fixed SWP

Capital appreciation SWP

▪ In capital appreciation mode, the

▪ In fixed mode, the systematic initial lump sum amount remains
withdrawal amount remains consistent
consistent ▪ The payout is the capital
▪ Irrespective of the overall market appreciation that is made due to
conditions, a fixed amount is the performance of the fund
credited in the bank account ▪ Since the payout depends upon
▪ This mode is important when the market, this mode is
steady flow of income is the important when the initial corpus
requirement is more important then the
monthly flow of income

Both the strategies can be used by the investor depending upon requirement
SWP: Effective usage in different scenario

Start-up Retirement Planning Investment Strategy

▪ Everyone wants to be an ▪ Investment in a debt oriented ▪ Bonus or one time payout can
entrepreneur. But before mutual fund along with other be invested in a liquid or ultra
quitting job, regular source of instruments like bank FD short term mutual fund
income is very important ▪ Regular payouts to supplement ▪ This amount can then be used
▪ SWP is idle for this and one can regular income for the next six or 12 months
invest in debt mutual fund
SIP SWP STP: Taxation
Investment Type Comment Description

▪ Each investment has to be held for at least 12 months to be

SIP Every installment considered as fresh investment
eligible for LTCG benefits

▪ If the amount is withdrawn from Debt mutual fund -

▪ Investment is held for <3 year, tax as per the investor's
tax slab
SWP Investment is actually redeemed at particular interval ▪ 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

▪ If the source fund is Debt mutual fund -

▪ Investment is held for <3 year, tax as per the investor's
tax slab
Investment moving from debt mutual fund to equity
STP ▪ Investment is held for > 3 year, 10% without indexation
mutual fund
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.
 SIP SWP STP: Retirement Planning
Using SIP/STP/SWP effectively for retirement planning

✓ Post retirement, the entire retirement corpus

✓ Investments done in equity mutual funds
is in debt mutual fund due to the STP option Post-Retirement should be transferred systematically into debt
✓ Instead of redeeming the entire corpus at one
go, the retired individual can withdraw STP mutual funds when retirement approaches
✓ It is necessary to reduce risk and can easily be
amount equivalent to their household needs
done through STP
through SWP option
✓ Through STP, predefined amount will be
✓ SWP allows regular income during retirement
transferred from equity scheme to debt
through regular withdrawal and also some
scheme of the same fund house
returns as the balanced corpus remains
invested in debt mutual fund SWP

Smart
Investor
✓ Start investment in equities early through SIP
✓ Starting early will help in accumulating
retirement corpus with lower monthly
SIP investment
Pre-Retirement
✓ SIP gives benefit from market volatility and
accounts for “rupee cost averaging”
SIP SWP STP: Recap
In Systematic Investment Plan, a fixed sum of money is debited from one’s bank
SIP account at a predefined frequency (weekly, bi-monthly, monthly etc.) and
invested in a mutual fund

Bank Mutual Fund

In Systematic Transfer Plan, a fixed sum of money is transferred from source

STP mutual fund (where the amount is already invested upfront) to target mutual
fund at predefined frequency on a specified date
Source Scheme Target Scheme

In Systematic Withdrawal Plan, a fixed sum of money is withdrawn from one’s

SWP mutual fund statement at a predefined frequency (normally monthly)

Mutual Fund Bank

SWP
SIP ✓ Works well in both rising
STP
✓ Rupee cost averaging ✓ Rupee cost averaging in
and falling market
Advantages ✓ Compounding rising market
conditions
✓ Allows regular investment ✓ Helps in retirement
✓ Meets short term
planning
objective
HOW TO INVEST
IN
MUTUAL FUNDS
Steps for Investing in Mutual Funds

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 .
Modes of Investing

📝Physical Mode✍🏻
(Traditional / Paper based )

and
On-line Mode
How to invest in a Mutual Fund Scheme?
• 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 withdraw your money?
• 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.
Performance Evaluation Principles

• 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
What is NAV?

• 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.
Product Labelling
• 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.”
Nomination

• 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.
Why is Nomination important?

• 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).
Complaints Redressal Mechanism

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.
SEBI Complaints Redress System
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/

Thank You

88
“Visit here https://licmf.info/KYCredressal to learn more about KYC requirements, SEBI Registered Mutual Funds
and Grievance redressal.”