Analysis of Mutual Funds

A REPORT ON
ANALYSIS OF MUTUAL FUNDS
By
Manaswi Gandhi
IBS Mumbai
Analysis Of Mutual Funds And Data Analysis
FINAL REPORT ON
ANALYSIS OF MUTUAL FUNDS

Submitted To:
Facult !uide:
P"o#$ Mo%a&da' Nai" (IBS) MUMBAI*
+om,a& !uide:
Dee,ali Pa"-a" (Relatio&'%i, Ma&a.e") Ma%i&d"a Fi&a&ce*
Submitted b : Ma&a'/i !a&d%i 0 12 BS 2314
(IBS) Mumbai*
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Acknowledgement:
T%i' "e,o"t i' a ' &e".i'tic ,"oduct o# ma& mi&d'$ It be.a& o& 25"d Feb"ua" ) 2114) t%e da I /a' i&ducted a' a 'umme" t"ai&ee at MA6INDRA FINAN+E$ A' a& Amateu" to t%e co",o"ate e&7i"o&me&t) t%i' t"ai&i&. at MA6INDRA FINAN+E %a' bee& a 7e" i&'i.%t#ul$ I am ."ate#ul #o" t%e i&',i"atio& a&d /i'dom o# ma& ,eo,le #o" t%ei" i&'i.%t' a&d e&cou"a.eme&t$ I me&tio& t%e &ame' o# all t%o'e ,eo,le /%o %a7e e&"ic%ed a&d im,"o7ed m t%i&-i&. t%"ou.% t%ei" co&7e"'atio&'$ T%e team membe"' i& t%e mutual #u&d' a"e Dee,ali Pa"-a" (Relatio&'%i, Ma&a.e"*) M"'$ U88a/la) Mi'' +%et&a 9ot/al$ But /it%out t%e &ame' o# 'ome ,eo,le t%i' ,"o8ect "e,o"t /ould &ot be ,o''ible$ T%i' "e,o"t %a' bee& a&al :ed a&d '%a",e&ed b t%e i&tellectual ,"oce''$ Fi"'t a&d #o"emo't) I /ould li-e to e;,"e'' m 'i&ce"e "e.a"d' to m ,"o8ect .uide Dee,ali Pa"-a" (Relatio&'%i, Ma&a.e"*$ 6e" 7i'io& a&d t%e 7aluable time t%at '%e '%a"ed /it% me /ill al/a ' be a 'ou"ce o# i&',i"atio& #o" me$ T%e& I /ould to t%a&- ou" #acult .uide) M"$ Mo%a&da' Nai" (P"o#e''o") IBS) Mumbai* /%o let me to i&itiate t%e ,"o8ect a&d ,"o7ided 7aluable 'u..e'tio& a&d .uida&ce du"i&. t%e /%ole ,"o8ect$ 6i' ,e"',ecti7e %a' e&cou"a.ed me to i&co",o"ate a di##e"e&t dime&'io& to t%e ,"o8ect$ I al'o e;,"e'' m 'i&ce"e t%a&-' to m #ello/ 'tude&t' du"i&. t%e ,"o8ect) 'ta## o# MA6INDRA FINAN+E) a&d all ,eo,le "elated to me #o" t%ei" co&ti&ued 'u,,o"t < a,,"eciatio&
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Table of Contents
S. No. 3$ 2$ 5$ >$ =$ @$ 2$ 4$ ?$ 31$ 33$ 32$ 35$ 3>$ 3=$ 3@$ 32$ 34$ Contents E;ecuti7e Summa" +om,a& B"ie# Ab't"act I&t"oductio& 6i'to" o# Mutual Fu&d Mutual Fu&d St"uctu"e T ,e' o# Mutual Fu&d A% Mutual Fu&dB Mutual #u&d 6ou'e' i& I&dia Ri'- A&al 'i' +alculatio& O# Ri'Ri'- Ad8u'ted Pe"#o"ma&ce Ri'- a&d Retu"& !lobal Mutual #u&dCI&dia& Mutual Fu&d T%e ELSS Ad7a&ta.e Ne/ +o&ce,t Fact' a&d Fi.u"e Re#e"e&ce' Page No. 13 12 1= 12 1? 33 3> 34 52 55 5@ >1 >2 >@ =1 =2 @= @2
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!ecuti"e Summa#y
I %a7e do&e m SIP /it% MA6INDRA FINAN+E #"om 25 "d Feb"ua" ) 2114 to 2>t% Ma 2114$ I /a' a''i.&ed t%e #ollo/i&. ,"o8ect':- $esea#c% Analysis of Mutual Fund &ndust#y. - Dist#ibution of Mutual Funds. P#ofile key #esult a#ea 0 U&de"'ta&di&. T%e Im,o"ta&ce o# A&al 'i' o# Mutual Fu&d I&du't" $ $e'o#ting:- I %a7e to "e,o"t Dee,ali Pa"-a" (Relatio&'%i, Ma&a.e"*) /%o acted a' a me&to" #o" t%e ,"o8ect (ow did & a''ly my lea#ning at &)S* Du"i&. t%e ,"o8ect m lea"&i&. i& cla''"oom (ca'e 'tud ) a''i.&me&t* ,"o7ed to be 7e" u'e#ul$ At time' I "e#e""ed to m &ote' a&d 'tud mate"ial$ +ea#ning du#ing S&P: I lea"&t a lot du"i&. t%e ,"o8ect$ Fi"'tl ) it ,"o7ided me t%e muc% &eeded co",o"ate e;,o'u"e (bu'i&e'' commu&icatio&) a&d bei&. a&'/e"able to t%e 'e&io"'*$ Seco&dl ) t%e ,"o8ect %el,ed me t%e .ai& i&'i.%t i&to mutual #u&d i&du't" $ P#e'a#ation,Ac%ie"ement,$ecognition: I be.a& u&de"'ta&di&. t%e 7a"iou' /ealt% ma&a.eme&t o,tio& .i7e& b t%e com,a& to it' clie&t'$
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Com'any )#ief
-ision. St#ategy and Positioning

Ou" .oal i' to be t%e ,"e#e""ed ,"o7ide" o# "etail #i&a&ci&. 'e"7ice' i& t%e "u"al a&d 'emi -u"ba& a"ea' o# I&dia$ Ou" 't"ate. i' to ,"o7ide t%e la".e't "a&.e o# #i&a&cial 'e"7ice' to ou" co&'ume"' t%"ou.% ou" e;te&'i7e &et/o"- o# b"a&c%e') ',"ead out o7e" I&dia$ Ae /ould li-e to ,o'itio& ou"'el7e' a' t%e luc"ati7e o,tio& bet/ee& t%e o".a&i:ed ba&-i&. 'ecto" a&d t%e mo&e le&de"') ,"o7idi&. ou" cu'tome"' /it% a mi; o# ,e"'o&ali:ed) #le;ible a&d e##icie&t le&di&. 'e"7ice'$
About ou# +ogo:

A&a&d Rat%i i' /"itte& i& .old lette"i&. /it% a ."ee& bac-."ou&d$ It 'ta&d' #o" tu"&i&. ou" mo&e to .old$ !"ee& i' t%e colou" o# mo&e a&d ."o/t%$ T%e .old lette"i&. i&dicate' /ealt% a&d ,"o',e"it $ T%e #o&t i' cla'' a&d 'e"iou'$ It .i7e' a ,e"'o&al #eel) a 'e&'e o# 'ecu"it o# ou" mo&e bei&. i& 'a#e %a&d'$ T%e ba'eli&e Dbe%i&d e7e" 'ucce''#ul i&7e'to"E i' u&de"'tated$ T%atF' -ee,i&. i& li&e /it% ou" ,%ilo'o,% o# bei&. clie&t ce&t"ic$ T%e #ocu' i' o& clie&t$ Ae 8u't /o"- be%i&d t%e 'ce&e' to ma-e mo&e #o" clie&t$
Com'any P#ofile:
Ma%i&d"a < Ma%i&d"a Fi&a&cial Se"7ice' Limited) a &o&-ba&-i&. #i&a&ce com,a& ) e&.a.e' i& lea'e a&d %i"e ,u"c%a'e #i&a&ce bu'i&e'' i& I&dia$ T%e com,a& ,"o7ide' #i&a&ce #o" utilit 7e%icle') t"acto"') a&d ca"' #o" "u"al a&d 'emi-u"ba& ma"-et'$ It al'o o##e"' #i&a&ce #o" t/o /%eele"') #a"m eGui,me&t) -@-
comme"cial 7e%icle') a&d co&'t"uctio& eGui,me&t$ I& additio&) Ma%i&d"a < Ma%i&d"a Fi&a&cial Se"7ice' ,"o7ide' i&7e'tme&t ad7i'o" 'e"7ice'$ A' o# Ma"c% 53) 2112) it %ad >15 b"a&c%e'$ T%e com,a& /a' #ou&ded i& 3??3$ It /a' #o"me"l -&o/& a' Ma;i Moto"' Fi&a&cial Se"7ice' Limited a&d c%a&.ed it' &ame to Ma%i&d"a < Ma%i&d"a Fi&a&cial Se"7ice' Limited i& 3??2$ T%e com,a& i' ba'ed i& Mumbai) I&dia$ Ma%i&d"a < Ma%i&d"a Fi&a&cial Se"7ice' Limited i' a 'ub'idia" o# Ma%i&d"a < Ma%i&d"a Limited$ Rece&tl /e %a7e "ecei7ed t%e &ece''a" ,e"mi''io& #"om Re'e"7e Ba&- o# I&dia (RBI* to 'ta"t t%e di't"ibutio& o# Mutual Fu&d ,"oduct' t%"ou.% ou" &et/o"-$ 6it%e"to /e /e"e o&l ,a"tici,ati&. i& t%e liabilit "eGui"eme&t' o# ou" cu'tome"' but /it% a mutual #u&d di't"ibutio& bu'i&e'') /e ca& al'o ,a"tici,ate i& t%ei" a''et allocatio&$ A%e& it come' to i&7e'ti&.) e7e" o&e %a' u&iGue &eed' ba'ed o& t%ei" o/& ob8ecti7e' a&d "i'- ,"o#ile$ A%ile ma& i&7e'tme&t a7e&ue' 'uc% a' #i;ed de,o'it') bo&d' etc$ e;i't) it i' u'uall 'ee& t%at eGuitie' t ,icall out,e"#o"m t%e'e i&7e'tme&t') o7e" a lo&.e" ,e"iod o# time$ 6e&ce /e a"e o# t%e o,i&io& t%at) ' 'tematic i&7e'tme&t i& eGuit allo/' o&e to c"eate 'ub'ta&tial /ealt%$ 6o/e7e") i&7e'ti&. i& eGuit i' &ot a' 'im,le a' i&7e'ti&. i& bo&d' o" ba&de,o'it') becau'e o&l ,"o,e" allocatio& o# ,o"t#olio .i7e' ma;imum "etu"&' /it% mode"ate "i'-) a&d t%i' "eGui"e' e;,e"ti'e a&d time$ Ou" I&7e'tme&t Ad7i'o" Se"7ice' %el, ou i&7e't ou" mo&e i& eGuit t%"ou.% di##e"e&t Mutual Fu&d Sc%eme'$ Ae e&'u"e t%e be't #o" ou" clie&t' b ide&ti# i&. ,"oduct' be't 'uited to i&di7idual &eed'$
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Key Events In Business History

3??5 +omme&ced #i&a&ci&. o# M<M UH' 3??= O,e&ed #i"'t b"a&c% out'ide Mumbai) at Iai,u" 3??@ +omme&ced #i&a&ci&. M<M deale"' #o" ,u"c%a'e o# t"acto"' 3??4 Lau&c%ed ,ilot ,"o8ect #o" "etail t"acto" #i&a&ci&. 3??? +omme&ced t"acto" "etail #i&a&ci&. i& "u"al a&d 'emi-u"ba& a"ea' 2113 Total A''et' c"o''ed R'$ 31 billio& 2112 +omme&ced #i&a&ci&. o# &o&-M<M 7e%icle' Recei7ed Tie" II debt #"om I&te"&atio&al Fi&a&ce +o",o"atio& Made #i"'t 'ecu"iti:atio& t"a&'actio& o# R'$ >5>$4 millio& 211> Recei7ed a lo&.-te"m c"edit "ati&. o# AAJCStable O,e&ed a b"a&c% i& Po"t Blai" Li'ti&. o# &o& co&7e"tible debe&tu"e' o& BSE o& t%e /%ole'ale debt ma"-et 'e.me&t Secu"iti:atio& o# t"acto" a''et' o# R'$ 2=@$@ millio& 211= Tied u, /it% 6P+L Made MIBL a /%oll o/&ed 'ub'idia" 211@ I''ued IPO Tied u, /it% Ma"uti Lau&c%ed ma"-eti&. cam,ai.& Reac%ed a &e/ be&c%ma"- /it% >11 b"a&c%e'
Abst#act
T%e i&7e'tme&t o,tio& I am deali&. /it% i':Mutual Fund
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P#o/ect:
A&al 'i' O# Mutual Fu&d' I&du't" A&d Data A&al 'i'$
Ob/ecti"e:
T%e ob8ecti7e o# t%i' 'tud /a' to .et t%e a/a"e&e'' o# t%e mutual #u&d it) i&7e'ti&. i& MUTUAL FUND H' i&du't" ) 7a"iou' 'c%eme' o##e"ed b
I&7e'tme&t ,"oduct' "i'- i& Mutual #u&d i&7e'tme&t etc$
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ANAYLASIS OF MUTUAL FUND INDUSTRY
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P6ASE 3
&nt#oduction
DPut ou" mo&e i& t"u't) &ot t"u't i& mo&e E e&tice' t%e 'mall i&7e'to"') /%o .e&e"all lac- e;,e"ti'e to i&7e't o& t%ei" o/& i& t%ei" 'ecu"itie' ma"-et a&d ,"e#e" 'ome -i&d o# collecti7e i&7e'tme&t 7e%icle') /%ic% ca& ,ool t%e ma".i&al "e'ou"ce'$ A Mutual Fu&d i' a t"u't t%at ,ool' t%e 'a7i&. o# a &umbe" o# i&7e'to" /%o '%a"e' a commo& #i&a&cial .oal$ T%e mo&e t%u' collected i' t%e& i&7e'ted i& ca,ital ma"-et 'uc% a' '%a"e') debe&tu"e' a&d ot%e" 'ecu"itie'$ T%e i&come ea"&ed t%"ou.% t%e'e i&7e'tme&t' a&d t%e ca,ital a,,"eciatio& "eali:ed a"e '%a"e' b it' u&itE' %olde"' i& ,"o,o"tio& to t%e &umbe" o# u&it' o/&ed b t%em$ T%u' a mutual #u&d i' t%e mo't 'uitable i&7e'tme&t #o" t%e commo& ma& a' it o##e"' a& o,,o"tu&it to i&7e't i& a di7e"'i#ied) ,"o#e''io&all ma&a.ed ba'-et o# 'ecu"itie' at a "elati7el lo/ co't$ T%e #lo/c%a"t belo/ de'c"ibe' b"oadl t%e /o"-i&. o# mutual #u&d:-
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0%at is a Mutual Fund* A 7e%icle #o" i&7e'ti&. i& 'toc-' a&d bo&d'$ A Mutual Fu&d i' &ot a& alte"&ati7e i&7e'tme&t o,tio& to 'toc-' a&d bo&d'K "at%e" it ,ool' t%e mo&e o# 'e7e"al i&7e'to"' a&d i&7e't' t%i' i& 'toc-') bo&d') mo&e ma"-et i&'t"ume&t a&d ot%e" t ,e' o# 'ecu"itie'$ Bu i&. a Mutual Fu&d i' li-e bu i&. a 'mall 'lice o# a bi. ,i::a$ T%e o/&e" o# t%e mutual #u&d' u&it' .et' ,"o,o"tio&al '%a"e' o# t%e #u&d' .ai&') lo''e') i&come a&d e;,e&'e'$ ac% Mutual Fund %as a s'ecific stated ob/ecti"e:1 T%e #u&d ob8ecti7e i' laid out i& t%e #u&d' ,"o',ectu') /%ic% i' t%e le.al docume&t t%at co&tai&' i&#o"matio& about t%e #u&d) it' %i'to" ) it' o##ice"' a&d it' ,e"#o"ma&ce$ Some ,o,ula" ob8ecti7e' o# a mutual #u&d a"e:Funds Objective EGuit (!"o/t%* Debt (I&come* Mo&e Ma"-et (i&cl$ !ilt* Bala&ced What the fund will invest in O&l i& 'toc-' O&l i& #i;ed i&come 'ect$ I& '%o"t te"m mo&e i&'t$ Pa"tl i& 'toc-' a&d ,a"tl i&come 'ecu"itie'$
i& Fi;ed
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(isto#y Of Mutual Fund

T%e Mutual Fu&d i&du't" i& I&dia 'ta"ted i& 3?@5/it% t%e #o"matio& o# U&it T"u't o# I&dia) at t%e i&itiati7e o# "e'e"7e ba&- <.o7e"&me&t o# I&dia$ T%e ob8ecti7e t%e& /a' to att"act t%e 'mall i&7e'to"' < i&t"oduce t%em to ma"-et i&7e'tme&t) t%e %i'to" o# Mutual Fu&d' i& I&dia ca& be b"oadl di7ided i&to 'i; ,%a'e'$
P%ase2 32456124789 :#owt% of ;nit T#ust Of &ndia

I& 3?@5) UTI /a' e'tabli'%ed b a& act o# ,a"liame&t$ A' it /a' t%e o&l e&tit o##e"i&. Mutual Fu&d' i& I&dia) it /a' a mo&o,ol o,tio&all UTI /a' 'et u, b RBI but late" deli&-ed #"om RBI$ T%e #i"'t 'c%eme lau&c%ed b UTI /a' u&it 'c%eme 3?@>)it /a' #i"'t o,e& e&ded 'c%eme i& t%e cou&t" $ I& 3?21 di##e"e&t 'c%eme to 'uit' &eed' o# di##e"e&t cla'' o# i&7e'to" lau&c%ed b UTI$ Si; &e/ 'c%eme /e"e i&t"oduced bet/ee& 3?43 to 3?4> du"i&. 3?4>-4= &e/ 'c%eme 'uc% a' c%ild"e& .i#t ."o/t% #u&d <ma'te" '%a"e /e"e lau&c%ed$ Du"i&. 3??1 )UTI cate"ed to t%e dema&d #o" i&come 0o"ie&ted 'c%eme b lau&c%i&. mo&t%l i&come 'c%eme) a 'ome /%at u&u'ual mutual #u&d ,"oduct o##e"i&. a''u"ed "etu"&'$ I& 3?4> i&7e'tible #u&d co",u' /a' about R'$@11c"$ < b 3?42-44 AUM o# UTI %ad ."o/& to @211c"$
P%ase < 324781244=9: nt#y of 'ublic secto# funds

3?42 ma"-ed t%e e&t" o# ot%e" ,ublic 'ecto" mutual #u&d'$ SBI e'tabli'%ed t%e #i"'t &o& UTI 0 mutual #u&d i& No7embe" 3?42$ T%i' /a' #ollo/ed b +a&a"a Ba&- Mutual Fu&d) LI+ Mutual Fu&d) Ba&- o# I&dia Mutual Fu&d) I&dia& Mutual Fu&d) PNB Mutual Fu&d$ F"om 3?42-44- 3??2-?5 t%e a''et u&de" ma&a.eme&t i&c"ea'ed #"om @211c" to >211>c"$
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P%ase =3244=124459 me#gence of '#i"ate funds

A &e/ e"a o# mutual #u&d' i&du't" be.a& i& 3??5 /it% t%e ,e"mi''io& ."a&ted #o" e&t" o# ,"i7ate 'ecto" #u&d'$ Fo"ei.& #u&d ma&a.eme&t com,a&ie' /e"e al'o allo/ed to o,e"ate mutual #u&d') mo't o# t%em comi&. to I&dia t%"ou.%out 8oi&t 7e&tu"e' /it% I&dia& ,"omote"'$
P%ase 632445124449 :#owt% > S )& #egulation

Si&ce3??@) t%e mutual #u&d i&du't" i& I&dia 'a/ ti.%te" "e.ulatio& a&d %i.%e" ."o/t% )it 'caled &e/ %ei.%t' i& te"m' o# mobili:atio& o# #u&d'< &umbe" o# ,la e"'$ De"e.ulatio& <libe"ali:atio& o# t%e I&dia& eco&om %a' i&t"oduced com,etitio& a&d ,"o7ided im,etu'$ To ."o/t% o# i&du't" mutual #u&d i& I&dia "e.ulated b SEBI t%e bud.et o. u&io& .o7e"&me&t i& 3??? too- a bi. 'te, i& e;em,ti&. all mutual #u&d di7ide&d #"om i&come ta; i& t%e %a&d' o# i&7e'to"'$
P%ase ?324441<@@69 me#gence of la#ge > unifo#m indust#y

I& 2115 u&it t"u't o# i&dia &o lo&.e" %a' a ',ecial le.al 'tatu' a' a t"u't e'tabli'%ed b ,a"liame&t i&'tead$ I' t%e ,"e'e&t &ame o# t%e e"'t/%ile u&it t"u't o# I&dia$ No/ UTI mutual #u&d i' &o/ u&de" t%e SEBI "e.ulatio&$ I& 3??@ UTI mutual #u&d i' t%e la".e't ,la e" i& I&dia& #u&d i&du't" $ All SEBI com,lai&t 'c%eme o# t%e e"'t/%ile UTI u&de" it' c%a".e$ Ot%e" 'c%eme' (US-@>* o# UTI %a7e bee& ,laced /it% a ',ecial u&de"ta-i&. admi&i't"ated b t%e .o7e"&me&t o# I&dia$ I& 3??? ma"-ed t%e be.i&&i&. o# a &e/ ,%a'e i& t%e %i'to" o# mutual #u&d i&du't" i& I&dia$
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Mutual Fund St#uctu#e

A mutual #u&d i' 'et u, i& t%e #o"m o# a t"u't) /%ic% %a' ',o&'o") t"u'tee') A''et Ma&a.eme&t +om,a& a&d cu'todia&$ T%e t"u't i' e'tabli'%ed b ',o&'o" o" mo"e t%a& o&e ',o&'o" /%o i' li-e ,"omote" o# a com,a& $AM+ a,,"o7ed b SEBI ma&a.e' t%e #u&d' b ma-i&. i&7e'tme&t' i& 7a"iou' t ,e' o# 'ecu"itie'$ T%e mo&ito" t%e ,e"#o"ma&ce a&d com,lia&ce o# SEBI "e.ulatio& b t%e mutual #u&d'$ T%e 't"uctu"e o# a mutual #u&d %ou'e ca& be /ell u&de"'tood /it% t%e e;am,le .i7e& belo/:-
&m'o#tant Te#ms in Mutual Fund

29 Net Asset -alue3NA-9:
NAH de&ote' t%e ,e"#o"ma&ce o# a ,a"ticula" 'c%eme o# a mutual #u&d$ Mutual #u&d i&7e't t%e mo&e collected #"om t%e i&7e'to"' i& 'ecu"itie' ma"-et$ I& 'im,le /o"d') NAH i' t%e ma"-et 7alue o# t%e 'ecu"itie' %eld b t%e 'c%eme$ Si&ce ma"-et 7alue o# t%e 'ecu"itie' c%a&.e' e7e" da ) NAH o# a 'c%eme al'o 7a"ie' o& da to da ba'i'$ NAH i' "eGui"ed to be
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di'clo'ed b
t%e mutual #u&d' o& a "e.ula" ba'i' 0dail
o" /ee-l -
de,e&di&. o& t%e time o# 'c%eme$
<9
!'enses:
AM+' c%a".e a& a&&ual #ee') o" e;,e&'e "atio t%at co7e"' admi&i't"ati7e e;,e&'e') 'ala"ie') ad7e"ti'i&. e;,e&'e') etc$ A 3$=Le;,e&'e "atio mea&' t%e AM+ c%a".e' R' 3$=1 #o" e7e" R' 311 i& AUM$ A #u&d e;,e&'e "atio i' t ,icall to t%e 'i:e o# t%e #u&d' u&de" ma&a.eme&t a&d &ot to t%e "etu"& ea"&ed$ No"mall ) t%e co't o# "u&&i&. a #u&d ."o/ 'lo/e" t%a& t%e ."o/t% i& t%e #u&d 'i:e 0'o) t%e mo"e a''et i& t%e #u&d )t%e lo/e" '%ould be it' e;,e&'e "atio$ T%e e;,e&'e' ,"o,o"tio& u&de" 7a"iou' %ead' i' '%o/ belo/:
=9
nt#y +oad:
T%e co't o# t%e #u&d ma&a.eme&t ,"oce'' t%at i&clude' ma"-eti&. a&d i&itial co't a"e c%a".ed /%e& ou e&te" t%e 'c%eme$ T%e'e c%a".e' a"e te"med t%e e&t" load) t%e additio&al c%a".e /e ,a /%e& /e 8oi& t%e 'c%eme$ A&d i# t%e"e i' &o load) t%e bold #o&t i& t%e &e/ 'c%eme' ad 'a ' M&o e&t" loadN$
69
!it +oad:
Iu't li-e e&t" load' im,o'e a #ee /%e& /e lea7e t%e 'c%eme i$e$ /e "edeem ou" u&it') called t%e e;it load$ Load' a"e u'uall &ot #lat amou&t but %a7e a 't"uctu"e$ Needle'' to 'a ) load' i# a& a"e o&l a,,licable to o,e& 'c%eme' a&d &ot clo'e e&ded 'c%eme' becau'e /e ca& o&l bu 'uc% u&it' #"om t%e #u&d' o&l /%e& t%e 'c%eme i' lau&c%ed$
-3@-
Note: A' ,e" SEBI "e.ulatio&) t%e ma;imum e;it load a,,licable i' @L$t%e"e i' a #u"t%e" 'ti,ulatio& b SEBI t%at t%e e&t" load a&d e;it load ,ut to.et%e" ca&&ot e;ceed @Lo# t%e 'ale ,"ice$
?9
Contingent Defe##ed Sales +oad:

+DSL i' a c%a".e im,o'ed /%e& t%e u&it' o# t%e #u&d' a"e "edeemed du"i&. t%e #i"'t #e/ ea"' o# o/&e"'%i,$ U&de" t%e SEBI "e.ulatio&) a #u&d ca& c%a".e +DSL to u&it %olde"' e;iti&. #"om t%e 'c%eme /it%i& t%e #i"'t #ou" ea"' o# e&t" $
-32-
Ty'es Of Mutual Fund Sc%emes

29 O'en1ended Funds:
At a& time du"i&. t%e 'c%eme ,e"iod) i&7e'to"' ca& e&te" a&d e;it t%e #u&d 'c%eme (b bu i&.C'elli&. #u&d u&it'* at it' NAH (&et o# a& load c%a".e*$ I&c"ea'i&.l ) AM+' a"e i''ui&. mo'tl #u&d'$ o,e& e&ded
<9
Close1ended Funds:
A clo'e e&ded #u&d' o" 'c%eme %a' a 'ti,ulated matu"it ,e"iod o& t%e ba'i' o# t%e -e memo"a&dum o# t%e com,a& $ I&7e'to"' ca& i&7e't i& t%e 'c%eme at t%at time o# t%e i&itial ,ublic i''ue a&d t%e"ea#te" t%e ca& bu o" 'ell t%e u&it' o# t%e 'c%eme o& t%e 'toc- e;c%a&.e /%e"e t%e u&it' a"e li'ted$ Redem,tio& ca& ta-e ,lace o&l a#te" t%e ,e"iod o# t%e 'c%eme i' o7e"$ 6o/e7e") clo'e 0#u&d' a"e li'ted o& t%e 'toce;c%a&.e a&d i&7e'to"' ca& bu C'ell u&it' i& t%e 'eco&da" ma"-et (t%e"e i' &o load* Note: SEBI "e.ulatio& 'ti,ulate' t%at at lea't o&e o# t%e t/o e;it "oute' i' ,"o7ided to t%e i&7e'to"' i$e$ eit%e" "e,u"c%a'e #acilit o" t%"ou.% li'ti&. o& 'toc- e;c%a&.e$ T%e'e mutual #u&d' 'c%eme' di'clo'e NAH .e&e"all o& /ee-l ba'i'$
=9
Sc%emes acco#ding to in"estment ob/ecti"e:

A 'c%eme ca& al'o be cla''i#ied a' ."o/t% 'c%eme) i&come 'c%eme) o" bala&ced 'c%eme) co&'ide"i&. it' i&7e'tme&t ob8ecti7e'$ Suc% 'c%eme ma be o,e&-e&ded o" clo'e-e&ded 'c%eme' a' de'c"ibed ea"lie"$ Suc% 'c%eme' ma be cla''i#ied a' #ollo/':
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a9 !"o/t%CEGuit o"ie&ted 'c%eme:

T%e aim o# ."o/t% #u&d' i' to ,"o7ide ca,ital a,,"eciatio& o7e" t%e medium to lo&. te"m$ Suc% 'c%eme' &o"mall i&7e't a ma8o" ,a"t o# t%ei" co",u' i& eGuitie'$ Suc% #u&d' %a7e com,a"ati7el %i.% "i'-'$ T%e'e 'c%eme' ,"o7ide di##e"e&t o,tio& to t%e i&7e'to"' li-e di7ide&d o,tio& ca,ital a,,"eciatio& etc$ a&d t%e i&7e'to"' ma c%oo'e a& o,tio& de,e&di&. o& t%ei" ,"e#e"e&ce$ T%e i&7e'to" mu't i&dicate t%e o,tio& i& t%e a,,licatio& #o"m$ T%e mutual #u&d al'o allo/ t%e i&7e'to"' to c%a&.e t%e o,tio& at a late" date$ !"o/t% 'c%eme' a"e .ood #o" i&7e'to"' %a7i&. a lo&. te"m outloo- 'ee-i&. a,,"eciatio& o7e" a ,e"iod o# time$
b9 I&comeC Debt o"ie&ted 'c%eme:

T%e aim o# i&come #u&d i' to ,"o7ide "e.ula" a&d 'tead i&come to i&7e'to"'$ Suc% 'c%eme' .e&e"all i&7e't i& #i;ed i&come 'ecu"itie' 'uc% a' bo&d') co",o"ate debe&tu"e'$ Suc% #u&d a"e le'' "i'- com,a"ed to eGuit 'c%eme$ T%e NAH' o# 'uc% #u&d' a"e a##ected becau'e o# c%a&.e i& i&te"e't "ate' i& t%e cou&t" )i# t%e i&te"e't "ate' #all NAH o# 'uc% #u&d' a"e li-el to i&c"ea'e i& t%e '%o"t "u& a&d 7ice 7e"'a$ 6o/e7e" lo&. te"m i&7e'to"' ma &ot bot%e" about t%e'e #luctuatio&'$
c9 Bala&ced #u&d':
T%e aim o# bala&ced #u&d' i' to ,"o7ide bot% ."o/t% a&d "e.ula" i&come a' 'uc% 'c%eme' i&7e't bot% i& eGuitie' a&d #i;ed i&come' 'ecu"itie' i& t%e ,"o,o"tio& i&dicated i& t%ei" o##e" docume&t$ T%e'e a"e a,,"o,"iate #o" i&7e'to"' loo-i&. #o" mode"ate ."o/t%$ T%e .e&e"all i&7e't >1L-@1L i& eGuit a&d debt i&'t"ume&t$ T%e'e #u&d' a"e al'o a##ected becau'e o# #luctuatio& i& '%a"e ,"ice i& t%e 'toc- ma"-et$ 6o/e7e" NAH' o# 'uc% #u&d' a"e li-el to be le'' 7olatile com,a"ed to ,u"e eGuit #u&d'$
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d9 Mo&e Ma"-et o" LiGuid Fu&d:

T%e'e #u&d' a"e al'o i&come #u&d' a&d t%ei" aim i' to ,"o7ide ea' liGuidit ) ,"e'e"7atio& o# ca,ital a&d mode"ate i&come$ T%e'e 'c%eme' i&7e't e;clu'i7el i& 'a#e" '%o"t te"m i&'t"ume&t 'uc% a' t"ea'u" bill) ce"ti#icate' o# de,o'it) comme"cial ,a,e" a&d i&te" ba&- call mo&e ) .o7e"&me&t 'ecu"itie' etc$ Retu"&' o& t%e'e 'c%eme' #luctuate muc% le'' com,a"ed to ot%e" #u&d'$ T%e'e #u&d' a"e a,,"o,"iate #o" co",o"ate a&d i&di7idual i&7e'to"' a' a mea& to ,a"- t%ei" 'u",lu' #u&d' #o" '%o"t ,e"iod$
e9 !ilt Fu&d:
T%e'e #u&d' i&7e't e;clu'i7el i& .o7e"&me&t 'ecu"itie'$ !o7e"&me&t 'ecu"itie' %a7e &o de#ault "i'-$ NAH' o# t%e'e 'c%eme' al'o #luctuate due to c%a&.e i& i&te"e't "ate' a&d ot%e" eco&omic #acto"' a' a"e t%e ca'e /it% i&come o" debt o"ie&ted 'c%eme$
f9 I&de; Fu&d':
I&de; #u&d' "e,licate t%e ,o"t#olio o# ,a"ticula" i&de; 'uc% a' t%e BSE 'e&'iti7e i&de; S<P NSE =1 i&de; (Ni#t * etc t%e'e 'c%eme' i&7e't i& t%e 'ecu"itie' i& t%e 'ame /ei.%ta.e com,"i'i&. o# a& i&de;$ NAH' o# 'uc% 'c%eme /ould "i'e o" #all i& acco"da&ce /it% t%e "i'e o" #all i& t%e i&de;$ T%e"e a"e al'o e;c%a&.e t"aded i&de; #u&d' lau&c%ed b t%e mutual #u&d' /%ic% a"e t"aded o& t%e 'toce;c%a&.e$
g9 Secto" ',eci#ic #u&d'C'c%eme':

T%e'e a"e t%e #u&d'C'c%eme') /%ic% i&7e't i& t%e 'ecu"itie' o# o&l t%o'e 'ecto"' o" i&du't"ie' a' ',eci#ied i& t%e o##e" docume&t' e$.$ 'o#t/a"e) FM+!) etc$ /%ile t%e'e #u&d' ma .i7e %i.%e" "etu"&' ) t%e a"e mo"e "i'- com,a"ed to di7e"'i#ied #u&d'$ T%e ma al'o 'ee- ad7i'e o# a& e;,e"t$
-21-
%9 Ta; 'a7i&. 'c%eme':

T%e'e 'c%eme' o##e"' ta; "ebate' to t%e i&7e'to"' u&de" ',eci#ic ,"o7i'io&' o# t%e i&come ta; act) 3?@3 a' t%e .o7e"&me&t o##e"' ta; i&ce&ti7e' o# t%e i&7e'tme&t i& ',eci#ied a7e&ue') e$.$ELSS$ T%e'e 'c%eme' a"e ."o/t% o"ie&ted a&d i&7e't ,"e domi&a&tl i& eGuitie'$ T%ei" ."o/t% o,,o"tu&itie' a&d "i'-' a''ociated a"e li-e a& eGuit o"ie&ted 'c%eme'
69
+oad o# no1load fund:

A load #u&d i' o&e t%at c%a".e' a ,e"ce&ta.e o# NAH #o" e&t" o" e;it$ T%at i') eac% time o&e bu ' o" 'ell' u&it' i& t%e #u&d) a c%a".e /ill be ,a able$ T%i' c%a".e i' u'ed b t%e mutual #u&d #o" ma"-eti&. a&d di't"ibutio& e;,e&'e'$ Fo" e;: 'u,,o'e t%e NAH ,e" u&it i' "' 31$ I# t%e e&t" a' /ell a' e;it load c%a".ed i' 3L) t%e& t%e i&7e'to"' /%o bu /ould be "eGui"ed to ,a R' 31$31 a&d t%o'e /%o o##e" t%ei" u&it' #o" "e,u"c%a'e to t%e mutual #u&d /ill .et o&l R' ?$?1 ,e" u&it$ A &o load #u&d i' o&e t%at doe' &ot c%a".e #o" e&t" o" e;it$ It mea&' t%e i&7e'to"' ca& e&te" t%e #u&dC'c%eme' at NAH a&d &o additio&al c%a".e' a"e ,a able o& ,u"c%a'e o" 'ale o# u&it'$
T%e table belo/ me&tio& t%e t%e #u&d' acco"di&. to t%ei" &atu"e o# "i'-': Nature of Risks Lo/ "i'-' Mode"ate Ri'-' ate!ories of Funds Mo&e ma"-et #u&d' !-Sec #u&d'$ I&come #u&d' S%o"t te"m ,la&' Bala&ced #u&d' 6i.% Ri'I&de; #u&d' !"o/t% #u&d' Secto"' #u&d' -23-
0%y Mutual Funds*

A% mutual #u&dB T%e mo't im,o"ta&t Gue'tio&$ A%at t%e %ec- mutual #u&d i'B A% &ot di"ectl i&7e't i& eGuitie'$ T%e be&e#it' o# i&7e'ti&. i& mutual #u&d' ca& 'umma"i:ed i& t%e #ollo/i&. ,oi&t':
29
Affo#dability:
T%e mi&imum i&itial i&7e'tme&t #o" a mutual #u&d i' #ai"l lo/ #o" mo't #u&d' (a' lo/ a' "' =11 #o" 'ome 'c%eme'*$ A mutual #u&d i&7e't i& a ,o"t#olio o# a''et i$e$ bo&d') '%a"e' etc$ de,e&di&. u,o& t%e i&7e'tme&t ob8ecti7e o# t%e 'c%eme$ A& i&7e'to"' ca& bu i& to a ,o"t#olio o# eGuitie') /%ic% /ould ot%e"/i'e be e;t"emel e;,e&'i7e$
<9
Di"e#sification:
Di7e"'i#icatio& i' o&e o# t%e be't /a ' to "educe "i'-' (to u&de"'ta&d /% ) "ead t%e &eed to di7e"'i# *$ Mutual #u&d' o##e"' i&7e'to"' a& o,,o"tu&it to di7e"'i# ac"o'' a''et de,e&di&. o& t%ei" i&7e'tme&t &eed'$ Fo" e;: du"i&. o&e ,e"iod o# time eGuitie' mi.%t u&de",e"#o"m' but bo&d' a&d mo&e ma"-et i&'t"ume&t' mi.%t do /ell e&ou.% to o##'et t%e e##ect o# a 'lum, i& t%e eGuit ma"-et'$
=9
Fle!ibility and "a#iety:

You ca& ,ic- #"om co&'e"7ati7e) blue- c%i, 'toc- #u&d') 'ecto"al #u&d') #u&d' t%at aim to ,"o7ide i&come /it% mode't ."o/t% o" t%o'e t%at ta-e bi. "i'-' i& t%e 'ea"c% #o" "etu"&'$ You ca& e7e& bu bala&ced #u&d') o" t%o'e t%at combi&e 'toc-' a&d bo&d' i& t%e 'ame #u&d'$ Fo"e;: I&7e'to"' ca& i&7e't %i' mo&e i& a ."o/t% #u&d (eGuit 'c%eme* a&d i&come #u&d (debt 'c%eme* de,e&di&. o& %i' "i'-' a,,etite a&d t%u' c"eate a bala&ced ,o"t#olio ea'il o" 'im,l 8u't bu a bala&ced 'c%eme$
-22-
69
P#ofessional money management:

Fu&d ma&a.e"' a"e "e',o&'ible #o" im,leme&ti&. a co&'i'te&t i&7e'tme&t 't"ate. t%at "e#lect' t%e .oal' o# t%e #u&d'$ Fu&d ma&a.e"' mo&ito" ma"-et a&d eco&omic t"e&d' a&d a&al :e 'ecu"itie' i& o"de" to ma-e i&#o"med i&7e'tme&t deci'io&'$
?9
$egulation:
SEBI) t%e mutual #u&d "e.ulato" %a' clea"l de#i&ed "ule') /%ic% .o7e"& mutual #u&d'$ T%e'e "ule' "elate to t%e i&#o"matio& ) admi&i't"atio& a&d )ma&a.eme&t o# mutual #u&d' a&d al'o ,"e'c"ibe di'clo'u"e a&d accou&ti&. "eGui"eme&t$ Suc% a %i.% le7el o# "e.ulatio& 'ee-' to ,"otect t%e i&te"e't o# i&7e'to"'$
:#ound $ules of &n"esting

T%e /o"ld o# i&7e'tme&t too %a' 'e7e"al ."ou&d "ule' mea&t #o" i&7e'to"' /%o a"e i&7oice i& t%ei" o/& "i.%t a&d /i'% to e&te" t%e m "iad /o"ld o# i&7e'tme&t$ T%e'e come i& %a&d #o" t%e"e i' e7e" ,o''ibilit o# lo'i&. /%at o&e %a' i# due ca"e i' &ot ta-e&$
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29
Assess you#self:
Sel# 0 a''e''me&t o# o&e' &eed'K e;,ectatio& a&d "i'- ,"o#ile i' o# ,"ime im,o"ta&ce #aili&. /%ic%K o&e /ill ma-e mo"e mi'ta-e i& ,utti&. mo&e i& "i.%t ,lace' t%a& ot%e"/i'e$ O&e '%ould ide&ti# t%e de."ee o# "i'-' bea"i&. ca,acit o&e %a' a&d al'o clea"l 'tate t%e e;,ectatio& #"om t%e i&7e'tme&t$ I""atio&al e;,ectatio& /ill o&l b"i&. ,ai&$
<9
DonAt #us% in 'icking funds. t%ink fi#st:

O&e #i"'t %a' to decide /%at %e /a&t' t%e mo&e #o" a&d it i' t%i' i&7e'tme&t .oal t%at '%ould be t%e .uidi&. li.%t #o" all i&7e'tme&t do&e$ O&e '%ould ta-e a loo- at t%e ,o"t#olio o# t%e #u&d' #o" t%e ,u",o'e$ Mutual #u&d' i&7e't /it% a ce"tai& ideolo. 'uc% a' t%e MHalue P"i&ci,leN o" M!"o/t% P%ilo'o,% N$ Bot% %a7e t%ei" '%a"e o# c"itic' but bot% ,%ilo'o,% /o"- #o" i&7e'to"' o# di##e"e&t -i&d'$
=9
&n"estB DonAt s'eculate:

A commo& i&7e'to" i' limited i& t%e de."ee o# "i'- t%at %e i' /illi&. to ta-e$ O&e '%ould ab'tai& #"om ',eculati&. /%ic% i& ot%e" /o"d' /ould mea& .etti&. out o# o&e #u&d a&d i&7e'ti&. i& a&ot%e" /it% t%e i&te&tio& o# ma-i&. Guic- mo&e $ O&e /ould do /ell to "emembe" t%at &obod ca& ,e"#ectl time t%e ma"-et 'o 'ta i&. i&7e'ted i' t%e be't o,tio& u&le'' t%e"e i' com,elli&. "ea'o& to e;it$
69
)e #egula#:
I&7e'ti&. '%ould be a %abit a&d &ot a& e;e"ci'e u&de"ta-e& at o&e /i'%e') i# o&e %a' to "eall be&e#it #"om t%em$ 6e /ould 'ta&d a bette" c%a&ce o# .e&e"ati&. mo"e "etu"&' t%a& t%e ma"-et #o" t%e e&ti"e du"atio&$
-2>-
?9
Find t%e #ig%t funds:

Fi&di&. #u&d' t%at do &ot c%a".e ma& #ee' o# im,o"ta&ce) a' t%e #ee c%a".ed ultimatel .oe' #"om t%e ,oc-et o# i&7e'to"'$ Fi&di&. t%e "i.%t #u&d' i' im,o"ta&ce a&d o&e '%ould al'o u'e t%e'e #u&d' #o" ta; e##icie&c $ I&7e'to"' o# eGuit '%ould -ee, i& mi&d t%at all di7ide&d' a"e cu""e&tl ta; 0#"ee i& I&dia a&d 'o t%e ta; liabilitie' ca& be "educed i# t%e di7ide&d ,a out o,tio& i' u'ed$ I&7e'to"' o# debt /ill be c%a".ed a ta; o& di7ide&d di't"ibutio& a&d 'o ca& ea'il a7oid t%e ,a me&t o,tio&$
59
Cee' t#ack of in"estment:

Fi&di&. t%e "i.%t #u&d' i' im,o"ta&t but e7e& mo"e im,o"ta&t i' to -ee, t"ac- b t%e /a t%e a"e ,e"#o"mi&. i& t%e ma"-et$ I# t%e ma"-et i' be.i&&i&. to e&te" a bea"i'% ,%a'e) t%a& i&7e'to"' o# eGuit too /ill be&e#it b '/itc%i&. to debt #u&d' a' t%e lo''e' ca& be mi&imi:ed$
0%o can in"est in Mutual Fund*

Ae &eed to a/a"e o# /%o ca& bu mutual #u&d' u&it' o" '%a"e'$ Mutual #u&d' i& I&dia a"e o,e& to i&7e'tme&t b
29 $esidents including:
a* Re'ide&t I&dia& I&di7idual b* I&dia& +om,a&ie' c* I&dia& t"u'tCc%a"itable t"u't' d* Ba&-' e* No& 0Ba&-i&. Fi&a&ce com,a&ie' #* I&'u"a&ce com,a&ie' .* P"o7ide&t #u&d'
-2=-
<9 Non $esidents &ncluding:

a* No& "e'ide&t' I&dia&' b* O7e"'ea' co",o"ate bodie'
=9 Fo#eign entities:
a* Fo"ei.& I&'titutio&al I&7e'to"' "e.i'te"ed /it% SEBI$ Fo"ei.& citi:e&'Ce&titie' a"e %o/e7e" &o/ allo/ed to i&7e't i& I&dia$
(ow To Make Money &n Mutual Funds*

T%e"e a"e t%"ee /a ' i& /%ic% o&e ca& ma-e mo&e i& mutual #u&d': 3* O&e ca& ea"& a di7ide&d #"om t%e Mutual Fu&d$ Mo't debt #u&d decla"e di7ide&d o& t%e ba'i' o# t%e 'c%eme o# /%ic% t%e com,a& %a' to be decided$ A%e& a di7ide&d i' decla"ed) t%e NAH o# t%e u&it' /ill #all) 'i&ce di7ide&d i' ,aid out o# t%e a,,"eciatio& i& t%e 7alue o# t%e u&it$ 2* O&e ca& ma-e a ,"o#it b 'elli&. t%e mutual #u&d u&it' at a ,"ice %i.%e" t%a& t%at at /%ic% ou bou.%t t%em$ T%i' i' ca,ital .ai& ( i# ou 'ell t%e u&it' at a lo/e" ,"ice) ou ma-e a ca,ital lo''*$ 5* Fi&all ) t%e 7alue o# t%e u&it' ou %old ca& a,,"eciate$ Di7ide&d' a&d ca,ital .ai&' a"e t"eated di##e"e&tl $
Ta!ing in Mutual Funds

29 0%at is t%e ta! status of a mutual fund*
A mutual #u&d i' e;em,t #"om ,a i&. ta;e' o& it' i&come) b 7i"tue o# e;em,tio& ."a&ted u&de" t%e I&come Ta; Act$ T%e i&come' ea"&ed b t%e #u&d a"e o& it' i&7e'tme&t') a&d t%e'e i&come' a"e ,a''ed o& to t%e
-2@-
i&7e'to"'$ T%e"e#o"e t%e mutual #u&d i' me"el a M,a''-t%"ou.%N e&tit ) /%ic% doe' &ot .e&e"ate a& i&come o& it' o/&$ It i' t%e"e#o"e e;em,t #"om ,a i&. ta;e' o& it' i&come 0 di7ide&d') i&te"e't a&d ca,ital .ai&' bot% lo&. te"m a&d '%o"t te"m$
<9
0%at is t%e natu#e of income ea#ned by an in"esto# in a mutual fund*

A& i&7e'to" ca& ea"& %i' i&come #"om mutual #u&d i&7e'tme&t') i& t/o di##e"e&t #o"m': Di7ide&d' a&d ca,ital .ai&'$ Di7ide&d' a.ai& a"e o# t/o t ,e' 0 "e.ula" ,e"iodic di7ide&d) a' i&dicated i& t%e 'c%eme (dail ) mo&t%l ) Gua"te"l a&d t%e li-e* o" ad-%oc di7ide&d (ca& be a&&ou&ced a& time* a' a,,"o7ed b t%e t"u'tee'$ +a,ital .ai& (o" lo''* acc"ue' to t%e i&7e'to") /%e& t%e i&7e'to" ma-e' t%e deci'io& to "edeem t%e u&it'$ I# %e "edeem' t%e u&it' at a ,"ice t%at i' %i.%e" t%a& %i' co't o# ,u"c%a'e) t%e"e i' a ca,ital .ai&$ I# t%e "edem,tio& ,"ice i' lo/e" t%a& %i' co't) t%e"e i' a ca,ital lo''$
=9
0%at a#e t%e ta! im'lications of t%e o'tions c%osen by t%e in"esto#*
A& i&7e'to" ca& c%oo'e t%e #o"m i& /%ic% %e li-e' to ea"& %i' i&come #"om t%e mutual #u&d$ I# a& i&7e'to" c%oo'e' t%e ."o/t% o,tio&) %e doe' &ot ea"& a di7ide&d i&come$ To "eali:e %i' "etu"&') %e %a' to "edeem t%e u&it') 'uc% "edem,tio& i' 'ub8ect to t%e a,,licable ca,ital .ai&' ta;$ I# %e c%oo'e' di7ide&d o,tio&) %e ea"&' di7ide&d i&come t%at i' 'ub8ect to ta; a' 'uc%$ I# %e c%oo'e' a di7ide&d "e-i&7e'tme&t o,tio&) %e i' deemed to %a7e "ecei7ed t%e di7ide&d a&d 'ub'eGue&tl t%i' ca'e$ "e-i&7e'ted t%e 'ame) t%e"e#o"e t%e 'ame ta; ,"o7i'io&' t%at a,,l to di7ide&d' /ill a,,l i&
-22-
69
0%at is s%o#t te#m and long1te#m ca'ital gains f#om mutual fund in"estments* (ow a#e t%ey ta!ed*
I# a& i&7e'to" "edeem' %i' i&7e'tme&t' i& a mutual #u&d a#te" a ,e"iod o# 32 mo&t%' #"om t%e date o# bu i&. t%e u&it') %e i' 'aid to %a7e %eld t%e u&it' #o" t%e lo&. te"m$ T%e ca,ital .ai&' a"e ta;ed a' lo&.-te"m ca,ital .ai&' (LT+!*$ A& "edem,tio& o# u&it' be#o"e a ,e"iod o# 32 mo&t%' i' o7e" i' t"eated '%o"t te"m ca,ital .ai&' (ST+!*$ T%e "ate' o# ta;atio& #o" t%e t/o a"e di##e"e&t$ Lo&.-te"m ca,ital .ai&' a"e al'o 'ub8ect to ea") due to i&#latio&) t%e 7alue o# %i' i&de;atio&$ T%i' mea&') a& i&7e'to" ca& claim t%at 'i&ce %e %eld t%e i&7e'tme&t #o" mo"e t%a& a i&7e'tme&t' %a' .o&e u,$ T%e +BDT t%e"e#o"e ,ubli'%e' a +o't o# T%i' ,"oce'' i' called
I&#latio& I&de;) a&d allo/' t%e i&7e'to" to ad8u't %i' co't to t%e i&#latio& i&de;) be#o"e com,uti&. t%e ca,ital .ai&'$ i&de;atio& (I&de;ed co't O +o't o# acGui'itio& ; I&de; i& t%e ea" o# 'aleCI&de; i& t%e ea" o# ,u"c%a'e*$ T%e ta; "ate' a"e di##e"e&t de,e&di&. o& /%et%e" t%e ca,ital .ai&' a"e i&de;ed o" &ot$
Section <: Ta! P#o"isions as amended by Finance Act 3No.<9 <@@6 29 0%at is t%e ta! status of mutual fund di"idends*
Di7ide&d' #"om mutual #u&d' a"e e;em,t #"om ta;$ 6o/e7e") i& t%e ca'e o# all ot%e" #u&d') e;ce,t eGuit a&d eGuit o"ie&ted #u&d') t%e mutual #u&d' /ill %a7e to deduct a di7ide&d di't"ibutio& ta; at 32$=L J a,,licable 'u"c%a".e (2$=L* a&d ce'' (2L*) be#o"e ,a i&. out t%e di7ide&d to t%e i&7e'to"'$ A& eGuit -o"ie&ted #u&d i' o&e t%at i&7e't' at lea't =1L o# it' &et a''et' i& eGuit '%a"e' o# dome'tic com,a&ie'$ T%e mo&t%l o,e&i&. a&d clo'i&. %oldi&.' i& eGuit '%ould be com,uted) a&d t%e a&&ual a7e"a.e o# t%i' &umbe" '%ould be at lea't =1L) #o" t%e #u&d to be cla''i#ied a' a& eGuit -o"ie&ted #u&d) a&d be e;em,t #"om t%e ,"o7i'io&' o# t%e di7ide&d di't"ibutio& ta;$ T%e e;em,tio& #o" eGuit -o"ie&ted -24-
#u&d' %ad e;,i"ed o& Ma"c% 53) 211>$ T%e Fi&a&ce Act (No 2* 211> %a' e;te&ded t%i' be&e#it u&co&ditio&all #o" eGuit o"ie&ted #u&d'$ It %a' al'o made a di'ti&ctio& bet/ee& i&di7idual' a&d 6UF' a&d ot%e"'$ bee& i&c"ea'ed to 21L (,lu' 'u"c%a".e a&d ce''*$ T%e di7ide&d di't"ibutio& ta; a,,licable to all a''e''e') ot%e" t%a& i&di7idual' a&d 6UF') %a'
<9
0%at is t%e ta! status of ca'ital gains*

Lo&. te"m ca,ital .ai&' #"om eGuit -o"ie&ted #u&d') i' #ull e;em,t #"om ta;$ Lo&. te"m ca,ital .ai&' #"om all ot%e" #u&d') i' 'ub8ect to ta;atio&$ T%e a,,licable "ate' a"e 31L (/it%out i&de;atio&* o" 21L (/it% i&de;atio&*$ Su"c%a".e a&d ce'' a,,l $ NRI' a"e &ot eli.ible #o" i&de;atio& be&e#it') 'i&ce t%e ca& a7ail cu""e&c 7alue ad8u'tme&t #o" com,uti&. ca,ital .ai&'$ S%o"t te"m ca,ital .ai&' #"om eGuit -o"ie&ted #u&d') i' ta;able at 31L (,lu' S+ a&d ce''*$ I& t%e ca'e' o# all ot%e" #u&d') t%e '%o"t-te"m ca,ital .ai&' /ill be ta;ed a' &o"mal i&come) at t%e ma".i&al "ate' o# ta;atio& a,,licable to t%e i&7e'to"$ I&come ta; "ate' a,,l i& 'lab') ',eci#ied #o" eac% le7el o# i&come$ T%e ma".i&al "ate i' t%e %i.%e't "ate a& a''e''e' ,a ') .i7e& %i' le7el o# ta;able i&come$
=9
0%at is t%e secu#ities t#ansaction ta! 3STT9 a''licable to t%e mutual fund in"esto#*
A 1$3=L STT to be ,aid b t%e 'elle") o& all t"a&'actio&' i& eGuit o"ie&ted #u&d') /%e"e t%e u&it' a"e 'old to a mutual #u&d$ T%i' mea&') &o STT a,,lie' o& ,u"c%a'e o# u&it' #"om t%e #u&d$ O&l o& "edem,tio&) i& a& eGuit -o"ie&ted #u&d) t%e i&7e'to" i' "eGui"ed to ,a 1$3=L o# t%e t"a&'actio& 7alue a' STT$ I& t%e ca'e o# all ot%e" #u&d') t%at a"e &ot eGuit -o"ie&ted) t%e"e i' &o STT #o" t%e i&7e'to"E' t"a&'actio&' /it% t%e mutual #u&d$ -2?-
69
0%en do t%e new #ates of ca'ital gains ta! become a''licable*

T%e ca,ital .ai&' ta; a&d t%e 'ecu"itie' t"a&'actio& ta;) .o to.et%e"$ T%e &e/ ca,ital .ai&' ta; "ate' /ill become a,,licable #"om t%e date t%e +BDT &oti#ie' t%e STT$
?9
Can t%e STT be #educed f#om "alue of units befo#e com'uting ca'ital gains*
Sectio& >4 %a' bee& ame&ded to ,"o7ide t%at &o deductio& '%all be allo/ed i& "e',ect o# STT ,aid) #o" t%e ,u",o'e o# com,uti&. ca,ital .ai&'
Section =: Set1off. Di"idend st#i''ing and Debt funds

29 0%at is set1off*
A& i&7e'to") /%o ma-e' a ca,ital lo'' #"om %i' i&7e'tme&t') i' allo/ed to ca"" #o"/a"d t%i' lo'' #o" 4 ea"' #"om t%e date o# t%e lo''$ 6e ca& deduct t%e lo'' t%at i' ca""ied #o"/a"d) #"om t%e ca,ital .ai&' t%at %e ma-e' i& t%e 'ub'eGue&t ea"') 'o t%at %i' ca,ital .ai&' ta; i& t%e 'ub'eGue&t ea"' i' "educed$ T%i' act o# "educi&. t%e ca,ital .ai&' b deducti&. t%e ca,ital lo'' i' called 'et o##$ T%e "ule' #o" 'et o## a"e a' u&de": a$ Lo'' a"i'i&. #"om a '%o"t-te"m ca,ital a''et ca& be 'et o## a.ai&'t t%e .ai&' a"i'i&. #"om t%e 'ale o# a lo&. o" '%o"t-te"m ca,ital a''et$ b$ Lo'' a"i'i&. #"om a lo&.-te"m ca,ital a''et ca& be 'et o## o&l a.ai&'t t%e .ai&' #"om t%e 'ale o# lo&.-te"m a''et'$ c$ A& lo'' u&de" t%e %ead ca,ital .ai&') eit%e" '%o"t o" lo&. te"m) ca& be 'et o## o&l a.ai&'t i&come #"om t%e 'ame %ead (ca,ital .ai&'*$ S%o"t
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o" lo&. te"m ca,ital lo''e' ca&&ot be 'et-o## a.ai&'t a& ot%e" 'ou"ce o# i&come$ d$ I# t%e"e i' a lo'' u&de" a& ot%e" %ead o# i&come) t%at ca& be 'et o## a.ai&'t '%o"t o" lo&. te"m ca,ital .ai&'$ U&de" t%e cu""e&t ,"o7i'io&' a& i&7e'to" /%o %a' ca""ied #o"/a"d a lo&.te"m ca,ital lo'') ca& 'et it o## o&l a.ai&'t lo&. te"m ca,ital .ai&' #"om debt #u&d' a&d ot%e" #u&d' t%at %a7e le'' t%a& =1L i& eGuit $ T%i' i' becau'e lo&. te"m ca,ital .ai&' #"om ta; #o" eGuit -o"ie&ted #u&d' i' e;em,t #"om ta;$
<9
0%at a#e t%e new '#o"isions fo# set1off of ca'ital loss on e!1 di"idend basis*
Di7ide&d 't"i,,i&. i' t%e ,"actice o# bu i&. i&to a mutual #u&d ,"io" to decla"atio& o# di7ide&d) a&d 'elli&. t%e u&it' a#te" di7ide&d' at t%e e;di7ide&d ,"ice$ T%e i&7e'to" t%e& ea"&' ta;-#"ee di7ide&d' a&d al'o %a' a ca,ital lo'' t%at ca& be u'ed #o" ,u",o'e' o# 'et o##$ Sectio& ?>(2* a' ame&ded b t%e Fi&a&ce Act (No2* 211>) %a' ,lu..ed t%i' loo,%ole$ I# a& i&7e'to" acGui"e' a u&it a& time i& t%e ,e"iod o# 5 mo&t%' be#o"e t%e e;di7ide&d date) a&d 'ell' it /it%i& a ,e"iod o# ? mo&t%' #"om t%e e;di7ide&d date) t%e lo'' i& t%e 7alue o# i&7e'tme&t') to t%e e;te&t o# t%e di7ide&d decla"ed) /ill be i.&o"ed #o" t%e ,u",o'e' o# com,uti&. i&come c%a".eable to ta;$ A%at t%i' mea&' i' t%at 'uc% lo'' i& 7alue /ill &ot be ca,ital lo'') a7ailable #o" 'et o## a.ai&'t ca,ital .ai&'$A &e/ 'ectio& ?>(4* %a' bee& i&t"oduced /%ic% ma-e' t%e ,"o7i'io&' o# ?>(2* a,,l e7e& i# t%e di7ide&d di't"ibutio& i' i& t%e #o"m o# bo&u' u&it'$ T%e 'ame "ule' o# 5 mo&t%' be#o"e a&d ? mo&t%' a#te" e;-di7ide&d date' a,,l ) a&d t%e lo'' i& t%e 7alue o# u&it' /ill be deemed to be t%e ,u"c%a'e ,"ice o# t%e bo&u' u&it'$
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=9
0%y a#e debt funds 3and all funds t%at a#e not eDuity o#iented9 only sub/ect to di"idend dist#ibution ta!*
I& ca'e o# a #u&d t%at i' &ot eGuit -o"ie&ted) t%e i&come o# t%e #u&d i' mo'tl ea"&ed a' i&te"e't i&come) a&d i' &o"mall 'ub8ect to ta;$ But /%e& t%e mutual #u&d di't"ibute' t%e 'ame a' di7ide&d) it i' e;em,t #"om ta;$ T%e"e#o"e all #u&d' ot%e" t%a& eGuit -o"ie&ted #u&d' a"e 'ub8ect to di7ide&d di't"ibutio& ta;$ I& a& eGuit -o"ie&ted #u&d) t%e di7ide&d' t%at a"e ea"&ed a"e e;em,t #"om ta; a& /a ) a&d t%e com,a& t%at ,a ' t%e di7ide&d %a' ,aid t%e di7ide&d di't"ibutio& ta;) be#o"e di't"ibuti&. t%e di7ide&d to t%e mutual #u&d
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Section 6 E A''licable ta! #ates and effecti"e #ates

29 $esident &ndi"iduals and (;Fs
Ma;imum a,,licable ta; "ate - 51L A,,licable 'u"c%a".e #o" ca,ital .ai&' -21L (,lu' 'u"c%a".e* A,,licable 'u"c%a".e #o" Di7ide&d Di't"ibutio& Ta; 0 2$=L A,,licable ce'' 0 2L Equity Funds Debt Funds 31L J 31L S+J 51L J 31L S+J 2L +e'' 2L +e'' Te"m Effective - 11.22% +a,ital NIL Effective - 33.66% 31L J 31L S+J2L +e'' (/it%out i&de;atio&* Effective - 11.22% o 21LJ31LS+J2L +e'' (/it% i&de;atio&* Di7ide&d' NIL Effective ! 22.""% Di7ide&d' a"e ta;-#"ee$ Sub8ect to DDT P 32$=L J 2$=LS+ J 2L +e''$ Effective - 13.#$%
S%o"t !ai&' Lo&. !ai&'
Te"m
+a,ital
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<9
Pa#tne#s%i' Fi#ms and &ndian Com'anies
Ma;imum a,,licable ta; "ate - 5=L A,,licable 'u"c%a".e #o" ca,ital .ai&' 0 2$=L A,,licable 'u"c%a".e #o" Di7ide&d Di't"ibutio& Ta; 0 2$=L A,,licable +e'' 0 2L Equity Funds Debt Funds +a,ital 31LJ2$=L S+J 5=L J 2$=L S+J 2L +e'' 2L +e'' Te"m Effective - 36.%&2%% Effective ! 1#."6% +a,ital NIL 31L J 2$=L S+J2L +e'' (/it%out i&de;atio&* Effective ! 1#."6% o 21LJ2$=LS+J2L +e'' (/it% i&de;atio&* Di7ide&d' NIL Effective ! 2#.&1% Di7ide&d' a"e ta; 2$=LS+ J 2L +e''$ Effective ! 2#.&1% #"ee$
Te"m
Sub8ect to DDT P 21L J
-5>-
=9
Non1$esident &ndians
A,,licable Rate #o" ST+! - 51L (Deducted a' TDS* A,,licable Rate #o" LT+! - 21L (Deducted a' TDS* A,,licable Su"c%a".e #o" +a,ital !ai&' 0 31L A,,licable Su"c%a".e #o" Di7ide&d Di't"ibutio& Ta; 0 2$=L A,,licable +e'' 0 2L NRI' ca& o,t #o" com,utatio& o# LT+! u&de" Sectio& 332) /%ic% e&able' ad8u'ti&. #o" de,"eciatio& i& 7alue o# t%e "u,ee be#o"e com,uti&. LT+!$ Equity Funds S%o"t Debt Funds 'D(
Te"m 31L J 31L S+J 51L J 31L S+J 33$22L - EGuit 2L +e'' Effective 2L +e'' - Effective 33.66% 31L J S+J2L +e'' Effective TDS o" #o" debt 31L EGuit 0 Nil Debt 0 33$22L 55$@@L - Debt
+a,ital !ai&'
Lo&.
11.22% Te"m NIL
+a,ital !ai&'
Di7ide&d'
NIL
11.22% Di7ide&d' a"e ta; No #"ee$ Sub8ect to eGuit DDT P 32$=L J #u&d$ 2$=L S+ J 2L +e''$ Effective 13.#$% -
69
Fo#eign Com'anies
-5=-
Ma;imum A,,licable Ta; Rate - >1L A,,licable Su"c%a".e #o" +a,ital !ai&' 0 2$=L A,,licable Su"c%a".e #o" Di7ide&d Di't"ibutio& Ta; 0 2$=L A,,licable +e'' 0 2L Equity Funds Debt Funds +a,ital 31LJ2$=L S+J >1L J 2$=L S+J 2L +e'' 2L +e'' Te"m Effective ! "1.)2% Effective ! 1#."6% +a,ital NIL 31L J 2$=L S+J2L +e'' (/it%out i&de;atio&* Effective ! 1#."6% o 21LJ2$=LS+J2L +e'' (/it% i&de;atio&* Di7ide&d' NIL Effective ! 2#.&1% Di7ide&d' a"e ta; 2$=LS+ J 2L +e''$ Effective ! 2#.&1% #"ee$
Te"m
Sub8ect to DDT P 21L J
-5@-
P%a'e - 2
Mutual Funds %ouses in &ndia
Till 53't Ma"c% 2114 t%e"e a"e 5= mutual #u&d %ou'e' i& I&dia$ T%e &ame' o# t%e'e mutual #u&d %ou'e' /it% t%ei" "e',ecti7e &umbe" o# 'c%eme' i' to be /"itte& u&de" t%i'$ Out o# t%e 5= com,a& mutual #u&d to ,e"#o"m /ell i& t%e ma"-et it &eed' a 'u##icie&t co",u' 'i:e$ So t%at it ca& i&7e't i& 7a"iou' o,tio& a7ailable i& t%e ma"-et$ A&d #o" i&7e'tme&t it &eed' co",u'$ It' &ot t%at a& #u&d %ou'e /it% la".e co",u' 'i:e 0t%e "i'-' "educe' a bit$ T%e'e a"e t%e Mutual Fu&d' +om,a& 53'tma"c%2114$ Se"ial &o$ 3 2 5 > = 5? @ 2 4 ? 31 33 +%ola Ma&dlum Mutual 345 Fu&d F"a&-li& Tem,leto& 23 ==1 =14 2@> =5= Mutual Mutual Fu&d Fu&d 6DF+ Relia&ce Mutual Fu&d SBI Mutual Fu&d UTI Mutual Fu&d Mutual Fu&d Name ABN AMRO Fu&d AI! I&dia Mutual Fu&d Be&c%ma"- Ba&- Fu&d Bi"la Mutual Fu&d BOB Mutual Fu&d No$ o# Sc%eme' =5 3@ >>= Mutual 54= < t%ei" &umbe" o# 'c%eme' a' o&
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$isk Analysis
Mo't ,eo,le /ould a."ee t%at %i.% "etu"&' a"e .ood a&d "i'- i' bad$ T%e ,"oblem i' t%at "i'- < "etu"&' u'uall .o %a&d i& %a&d$ To ea"& abo7e a7e"a.e .ai&' o7e" t%e ea"' /it% ou" 'toc- mutual #u&d ) /e mu't be /illi&. to tole"ate %i.%e" le7el' o# 7olatilit $ Facto"' e##ecti&. 7a"iabilit o# t%e i&7e'tme&t ,e"#o"ma&ce: 3$ T%e -i&d o# 'toc-' i& t%e ,o"t#olio$ 2$ T%e de."ee to /%ic% a #u&d di7e"'i#ie'$ 5$ T%e de."ee to /%ic% a ma&a.e" u'e' le7e"a.e o" bo""o/i&.$ >$ T%e e;te&t) i# a& ) to /%ic% t%e ma&a.e" t"ie' to time t%e ma"-et o" %ed.e$
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Diffe#ent kinds of #isks

29 Com'any #isks:
T%e mo't ba'ic < ,ote&tial de7a'tati&. da&.e") /%ic% mo't mutual #u&d i&7e'to"' %a,,il a7oid) i' com,a& ',eci#ic o" "a&dom "i'-'$ Academic "e'ea"c% i&dicate' t%at b %oldi&. at lea't 32 to 21 di##e"e&t 'toc-' i& t%e ,o"t#olio$ Ae ca& elimi&ate mo't com,a& ',eci#ic "i'-'$
<9
-olatility:
A' t%e i&'t"ume&t t%at t%e #u&d' i&7e't i& a"e ma"-et to ma"-et) t%ei" NAH' a"e automaticall 'ub8ect to t%e ,"ice mo7eme&t o# t%e'e 'ecu"itie'$ T%e 7olatilit ) %o/e7e") 7a"ie' #"om 'c%eme to 'c%eme debt #u&d' a"e le'' 7olatile t%e& eGuit #u&d' becaue t%e #o"me" i&7e't mo"e i& #i;ed i&come) &o& .o7e"&me&t 'ecu"itie') /%e"e t%e 7olatilit i' lo/e"$
=9
St#ategy #isks:
T%i' "e#e"' to t%e bala&ced #u&d di7idi&. it' co",u' bet/ee& eGuit < debt'o t%e i&7e't bet/ee& >1 a&d @1 ,e"ce&t i& eGuit i&'t"ume&t a&d t%e bala&ce i& debt$ +o&ti&uou' b"eac%i&. o# 'et limit' i' a /a"&i&.) a' t%e de7iatio& #"om ma&date ca& .i7e "etu"&' i&co&'i'te&t /it% e;,ectatio&$
69
Secto# #isks
Di7e"'i#icatio& doe'&Et de,e&d 8u't o& %oldi&. a la".e &umbe" o# 'toc-'$ I&di7idual /%o i&7e't i& ',eciali:ed eGuit ,o"t#olio mu't "eco.&i:e t%ei" ,ote&tial 7olatilit $ I&du't" "i'- ma al'o be ,"e'e&t) albeit to a le''e" de."ee) i& di7e"'i#ied #u&d' t%at ta-e bi. ,o'itio& i& ce"tai& i&du't"ie'$
-5?-
?9
Ma#ket #isks:
Ma"-et "i'-' i' "eall a double ed.ed '/o"d$ Mo't ,eo,le "e.a"d it a' t%e t%"eat o# #aci&. a bea" ma"-et$ T%atE' t%e mo't ob7iou' da&.e"$ Ma"-et "i'-' i' 'ometime' called M&o& 0 di7e"'i#iableN "i'- becau'e o&e ca&t a7oid it &o matte" %o/ ma& 'toc-' a"e %eld i& a ,o"t#olio$
59
C#edit #isks:
I& '%o"t it mea&' %o/ 'table i' t%e com,a& o" e&tit i') i& /%ic% /e a"e ,ooli&. ou" mo&e $
89
!c%ange #ate #isks:

A &umbe" o# com,a&ie' .e&e"ate "e7e&ue' i& #o"ei.& cu""e&cie' < ma %a7e i&7e'tme&t < e;,e&'e' al'o de&omi&ated i& #o"ei.& cu""e&cie'$ 6e&ce) c%a&.e' i& e;c%a&.e "ate' ma %a7e a ,o'iti7e o" &e.ati7e im,act o& com,a&ie' /%ic% i& tu"& /ould %a7e a& e##ect o& t%e i&7e'tme&t o# t%e #u&d$
79
&n"estment #isks:
T%e 'ecto" #u&d 'c%eme' )i&7e'tme&t /ill be ,"edomi&atel i& eGuitie' o# 'elect com,a&ie' i& t%e ,a"ticula" 'ecto"'$ I& ot%e" /o"d') it "elate' to t%e i&7e'tme&t ,o"t#olio deci'io&' o# t%e ma&a.e" o# t%e #u&d$
->1-
Calculation of $isks:
Ri'-' ca& be calculated u'i&. 7a"iou' mea'u"e'$ Some o# t%e mea'u"e #o" calculati&. "i'-' a"e di'cu''ed belo/:
29
Standa#d De"iation
It "e#lect' t%e de."ee to /%ic% "etu"&' #luctuate a"ou&d t%ei" a7e"a.e$ T%e %i.%e" t%e 'ta&da"d de7iatio&) t%e ."eate" i' t%e "i'-$ T%e mea'u"e i' t ,icall calculated u'i&. mo&t%l "e'ult' /%ic% a"e .e&e"all di'clo'ed b Fu&d %ou'e' i& t%ei" #u&d u,date'$ A co&'e"7ati7e eGuit #u&d mi.%t %a7e a &umbe" belo/ 5$=L ,e" mo&t%) /%e"ea' a& e;t"emel a.."e''i7e o&e could %a7e a 7alue o# @L o" mo"e$ About t/o t%i"d' o# t%e time a #u&dE' actual mo&t%l "etu"& /ill "a&.e /it%i& ,lu' o" mi&u' Mo&e 'ta&da"d de7iatio&N o# it' mo&t%l a7e"a.e$ It' "etu"& /ill 7a" /it%i& t%e t/o 'ta&da"d de7iatio&' about ?= L o# t%e time$
->3-
Ait% t%e S<P =11 Fu&d B) t%e i&7e'to" /ould be acGui"i&. a la".e" amou&t o# 7olatilit "i'- t%a& &ece''a" to ac%ie7e t%e 'ame "etu"&' a' Fu&d A$ Fu&d A /ould ,"o7ide t%e i&7e'to" /it% t%e o,timal "i'-C"etu"& "elatio&'%i,
<9
T%e )eta Measu#e:

Ma"-et "i'- i' commo&l mea'u"ed b /%atE' -&o/& a' t%e Mbeta coe##icie&tN$ It "elate' t%e "etu"& o& a 'toc- o" mutual #u&d to a ma"-et i&de;$ T%i' i' o#te& do&e b ta-i&. "etu"&' #o") 'a ) t%e ,a't 5 ea"' < co""elati&. t%em /it% t%e i&de;E' mo&t%l "e'ult'$ Beta "e#lect' t%e 'e&'iti7it o# t%e "etu"& to #luctuatio&' i& t%e ma"-et i&de;$ T%e beta #o" t%e a7e"a.e /ell-di7e"'i#ied ,o"t#olio eGual' 3$1$Ma"-et "i'- i' commo&l mea'u"ed b /%atE' -&o/& a' t%e Mbeta coe##icie&tN$ It "elate' t%e "etu"& o& a 'toc- o" mutual #u&d to a ma"-et i&de;$ T%i' i' o#te& do&e b ta-i&. "etu"&' #o") 'a ) t%e ,a't 5 ea"' < co""elati&. t%em /it% t%e i&de;E' mo&t%l "e'ult'$ Beta "e#lect' t%e 'e&'iti7it o# t%e "etu"& to #luctuatio&' i& t%e ma"-et i&de;$ T%e beta #o" t%e a7e"a.e /ell-di7e"'i#ied ,o"t#olio eGual' 3$1$
=9
T%e T#eyno# Measu#e:

De7elo,ed b Iac- T"e &o") t%i' ,e"#o"ma&ce mea'u"e e7aluate' #u&d' o& t%e ba'i' o# T"e &o"Q' I&de;$ T%i' I&de; i' a "atio o# "etu"& .e&e"ated b t%e #u&d o7e" a&d abo7e "i'- #"ee "ate o# "etu"& (.e&e"all ta-e& to be t%e "etu"& o& 'ecu"itie' bac-ed b t%e .o7e"&me&t) a' t%e"e i' &o c"edit "i'a''ociated*) du"i&. a .i7e& ,e"iod a&d ' 'tematic "i'- a''ociated /it% it (beta*$ a' T"e &o"Q' I&de;O (Ti* O (Ri - R#*CBi A%e"e) DRiE "e,"e'e&t' "etu"& o& #u&d) DR#E i' "i'- #"ee "ate o# "etu"& a&d
->2-
DBiE i' beta o# t%e #u&d$ All "i'--a7e"'e i&7e'to"' /ould li-e to ma;imi:e t%i' 7alue$ A%ile a %i.% a&d ,o'iti7e T"e &o"Q' I&de; '%o/' a 'u,e"io" "i'--ad8u'ted ,e"#o"ma&ce o# a #u&d) a lo/ a&d &e.ati7e T"e &o"Q' I&de; i' a& i&dicatio& o# u&#a7o"able ,e"#o"ma&ce$
69
T%e S%a#'e Measu#e:

I& t%i' model) ,e"#o"ma&ce o# a #u&d i' e7aluated o& t%e ba'i' o# S%a",e Ratio) /%ic% i' a "atio o# "etu"&' .e&e"ated b t%e #u&d o7e" a&d abo7e "i'- #"ee "ate o# "etu"& a&d t%e total "i'- a''ociated /it% it$ Acco"di&. to S%a",e) it i' t%e total "i'- o# t%e #u&d t%at t%e i&7e'to"' a"e co&ce"&ed about$ So) t%e model e7aluate' #u&d' o& t%e ba'i' o# "e/a"d ,e" u&it o# total "i'-$ S mbolicall ) it ca& be /"itte& a' : S%a",e I&de; (Si* O (Ri - R#*CSi A%e"e) Si i' 'ta&da"d de7iatio& o# t%e #u&d$ A%ile a %i.% a&d ,o'iti7e S%a",e Ratio '%o/' a 'u,e"io" "i'--ad8u'ted ,e"#o"ma&ce o# a #u&d) a lo/ a&d &e.ati7e S%a",e Ratio i' a& i&dicatio& o# u&#a7o"able ,e"#o"ma&ce$
?9
T%e Fenson Model:

Ie&'o&Q' model ,"o,o'e' a&ot%e" "i'- ad8u'ted ,e"#o"ma&ce mea'u"e$ T%i' mea'u"e /a' de7elo,ed b Mic%ael Ie&'o& a&d i' 'ometime' "e#e""ed to a' t%e Di##e"e&tial Retu"& Met%od$ T%i' mea'u"e i&7ol7e' e7aluatio& o# t%e "etu"&' t%at t%e #u&d %a' .e&e"ated 7'$ t%e "etu"&' actuall e;,ected out o# t%e #u&d .i7e& t%e le7el o# it' ' 'tematic "i'-$ T%e 'u",lu' bet/ee& t%e t/o "etu"&' i' called Al,%a) /%ic% mea'u"e' t%e ,e"#o"ma&ce o# a #u&d com,a"ed /it% t%e actual "etu"&' o7e" t%e ,e"iod$ ReGui"ed "etu"& o# a #u&d at a .i7e& le7el o# "i'- (Bi* ca& be calculated a':
Ri O R# J Bi (Rm - R#*
A%e"e) Rm i' a7e"a.e ma"-et "etu"& du"i&. t%e .i7e& ,e"iod$ A#te" ->5-
calculati&. it) al,%a ca& be obtai&ed b 'ubt"acti&. "eGui"ed "etu"& #"om t%e actual "etu"& o# t%e #u&d$ It com,a"e' t%e actual "e'ult' o# a ,o"t#olio /it% /%at /ould %a7e bee& e;,ected .i7e& t%e #u&dE' beta < t%e ma"-etE' be%a7io"$ I# t%e #u&d #a"e' bette" t%a& ,"edicted) it %a' a ,o'iti7e al,%a < 7ice-7e"'a$ 6i.%e" al,%a "e,"e'e&t' 'u,e"io" ,e"#o"ma&ce o# t%e #u&d a&d 7ice 7e"'a$ Limitatio& o# t%i' model i' t%at it co&'ide"' o&l ' 'tematic "i'- &ot t%e e&ti"e "i'- a''ociated /it% t%e #u&d a&d a& o"di&a" i&7e'to" ca& &ot miti.ate u&' 'tematic "i'-) a' %i' -&o/led.e o# ma"-et i' ,"imiti7e$
59
T%e Fama Model:

T%e Eu.e&e Fama model i' a& e;te&'io& o# Ie&'o& model$ T%i' model com,a"e' t%e ,e"#o"ma&ce) mea'u"ed i& te"m' o# "etu"&') o# a #u&d /it% t%e "eGui"ed "etu"& comme&'u"ate /it% t%e total "i'- a''ociated /it% it$ T%e di##e"e&ce bet/ee& t%e'e t/o i' ta-e& a' a mea'u"e o# t%e ,e"#o"ma&ce o# t%e #u&d a&d i' called &et 'electi7it $ T%e &et 'electi7it "e,"e'e&t' t%e 'toc- 'electio& '-ill o# t%e #u&d ma&a.e") a' it i' t%e e;ce'' "etu"& o7e" a&d abo7e t%e "etu"& "eGui"ed to com,e&'ate #o" t%e total "i'ta-e& b t%e #u&d ma&a.e"$ 6i.%e" 7alue o# /%ic% i&dicate' t%at #u&d ma&a.e" %a' ea"&ed "etu"&' /ell abo7e t%e "etu"& comme&'u"ate /it% t%e le7el o# "i'- ta-e& b %im$ ReGui"ed "etu"& ca& be calculated a': Ri
O R# J SiCSmR(Rm 0 R#*
A%e"e) Sm i' 'ta&da"d de7iatio& o# ma"-et "etu"&'$ T%e &et 'electi7it i' t%e& calculated b 'ubt"acti&. t%i' "eGui"ed "etu"& #"om t%e actual "etu"& o# t%e #u&d$
->>-
$isk Ad/usted Pe#fo#mance

Met%odology:
T%e S%a",e) Fama) T"e &o" a&d Ie&'o& "atio' o# all t%e #u&d' i& eac% cate.o" i' calculated o& a dail ba'i' #"om 53't Ma"c% 2112 to 53't Ma"c% 2114$ T%e #u&d' a"e t%e& 'e,a"atel "a&-ed o& all t%e ,a"amete"' i& eac% cate.o" $ T%e a7e"a.e o# t%e'e "a&-' a"e calculated i& eac% cate.o" a&d "a&-ed acco"di&.l $ T%e 'ta&da"d de7iatio& a&d a7e"a.e "etu"&' o# t%e #u&d' a"e ,lotted i& eac% cate.o" $ T%e a7e"a.e o# t%e 'ta&da"d de7iatio& a&d a7e"a.e "etu"&' o# t%e #u&d' i& eac% cate.o" i' co&'ide"ed a' a be&c%ma"-$ I# t%e #u&dE' 'ta&da"d de7iatio& i' abo7e t%e a7e"a.e 'ta&da"d de7iatio& i& t%at cate.o" ) t%o'e #u&d' a"e co&'ide"ed a' mo"e "i'- $ A B+! mat"i; i' c"eated ba'ed o& t%e 'ta&da"d de7iatio& a&d a7e"a.e "etu"&'$ Fi"'t Suad"a&t - 6i.% Ri'- < 6i.% Retu"& Seco&d Suad"a&t - Lo/ Ri'- < 6i.% Retu"& T%i"d Suad"a&t - Lo/ Ri'- < Lo/ Retu"& Fou"t% Suad"a&t - 6i.% Ri'- < Lo/ Retu"&
->=-
Relati7e Ri'- Retu"& a&al 'i' (EGuit Di7e"'i#ied Sc%eme'*
Lo/ Ri'- 6i.% Retu"&

SBI Ma.&um !lobal 9ota- O,,o"tu&itie' DSP ML Ti.e"$ Bi"la Su& li#e EGuit Tata I&#"a't"uctu"e$
6i.% Ri'- 6i.% Retu"&

SBI Ma.&um Midca,$ Tata Select EGuit $ 6DF+ EGuit $ P"u I+I+I D a&amic Pla& SBI Ma.&um Multi,lie" Plu'$
9ota- 51 6DF+ To, 211 Relia&ce !"o/t%$ Relia&ce EGuit O,,o"tu&itie'
Tata EGuit O,,o"tu&itie' UTI T%ematic Mid +a,$ 6SB+ I&dia O,,o"tu&itie'$
Lo/ Ri'- Lo/ Retu"&
6i.% Ri'- Lo/ Retu"&
->@-
$isk and $etu#n

Retu"&' ac"o'' 7a"iou' a''et cate.o"ie' %a7e '%o/& t%at eGuit '%a"e' .i7e t%e %i.%e't le7el o# "etu"&' i& t%e lo&.-te"m) #ollo/ed b co",o"ate bo&d' a&d de,o'it' a&d la'tl ba&- de,o'it' a&d .o7e"&me&t debt$ P"edictabl t%e le7el o# "i'- i' al'o i& t%e 'ame o"de"$ Mutual Fu&d' o##e" a "a&.e o# 'c%eme' t%at co7e" di##e"e&t le7el' o# Ri'-' H' Retu"&'$
0ays to MinimiGe $isks.

Mi&imum t%e "i'- - bette" t%e #u&d$N So it i' t%e 8ob o# t%e Fu&d Ma&a.e" to ,"o7ide ma;imum "etu"&' /it% mi&imum "i'-$ So %e %a to mi&imi:e t%e "i'-' i&7ol7ed$ Mi&imi:atio& o# "i'-' ca& be do&e b 7a"iou' mea'u"e'$
29
MinimiGing $isk by Di"e#sification:

A%e& o&e i&7e't' i& Mutual Fu&d') %e i&'ta&tl ',"ead' %i' "i'- o7e" a &umbe" o# di##e"e&t com,a&ie'$ O&e ca& al'o di7e"'i# o7e" 'e7e"al di##e"e&t -i&d' o# 'ecu"itie' b i&7e'ti&. i& di##e"e&t mutual #u&d') #u"t%e" ->2-
"educi&. %i' ,ote&tial "i'-$ Di7e"'i#icatio& i' a ba'ic "i'- ma&a.eme&t tool t%at o&e /ould li-e to u'e t%"ou.%out %i' li#etime a' to "ebala&ce %i' ,o"t#olio to meet %i' c%a&.i&. &eed'$ I&7e'to"') /%o a"e /illi&. to mai&tai& a mi; o# eGuit '%a"e') bo&d') < mo&e ma"-et 'ecu"itie') %a7e a ."eate" c%a&ce o# ea"&i&. 'i.&i#ica&tl %i.%e" "etu"&' o7e" time t%a& t%o'e /%o i&7e't i& o&l t%e mo't co&'e"7ati7e i&7e'tme&t'$ Additio&all ) a di7e"'i#ied a,,"oac% to i&7e'ti&.- combi&i&. t%e ."o/t% ,ote&tial o# eGuitie' /it% t%e %i.%e" i&come o# bo&d' < t%e 'tabilit o# mo&e ma"-et'- %el,' mode"ate o&eE' "i'- < e&%a&ce' ,ote&tial "etu"&$
<9
MinimiGing $isk by Asset Allocation:

A''et allocatio& i' .e&e"all t%e mo't im,o"ta&t #acto" i& dete"mi&i&. t%e "etu"& o& ou" i&7e'tme&t'$ I& #act) acco"di&. to "e'ea"c%) a''et allocatio& (t%e t ,e' o" cla''e' o# 'ecu"itie' o/&ed* dete"mi&e' a,,"o;imatel ?1L o# t%e "etu"&$ T%e "emai&i&. 31L o# t%e "etu"& i' dete"mi&ed b /%ic% ,a"ticula" i&7e'tme&t' ('toc-) bo&d) mutual #u&d etc$* o&e 'elect' < /%e& %e decide' to bu t%em$ A''et allocatio& i' t%e co"&e"'to&e o# .ood i&7e'ti&.$ T%"ee -e a"ea' t%at dete"mi&e i&7e'tme&t ,e"#o"ma&ce #o" eac% a''et cla'' i& MA''et allocatio& ModelN: E;,ected "etu"&: T%i' i' a& e'timate o# /%at t%e a''et cla'' /ill ea"& i& t%e #utu"e- bot% i&come < ca,ital .ai&- ba'ed o& bot% %i'to"ical ,e"#o"ma&ce < eco&omic ,"o8ectio&'$ Ri'-: T%i' i' mea'u"ed b loo-i&. to t%e a''et cla''E' ,a't ,e"#o"ma&ce$ I# a& i&7e'tme&tE' "etu"&' a"e 7olatile) it i' co&'ide"ed %i.%-"i'-$ +o""elatio&: It i' dete"mi&ed b 7ie/i&. t%e e;te&t to /%ic% a''et cla''e' te&d to "i'e < #all to.et%e"$ 6i.% co""elatio& '%o/') deci'io& to i&7e't i& t%em /ill i&c"ea'e "i'-$ T%e co""ect a''et mi; /ill %a7e a lo/ co""elatio& amo&. a''et cla''e'$ ->4-
=9
Time $educes Ma#ket $isk:

To ma-e mo&e i& t%e 'toc- ma"-et) o&e %a' to /it% t%e ,"obabilitie') /%ic% mea&' %a&.i&. i& t%e"e#o"e t%e lo&. te"m$ O&e o# t%e mo't im,o"ta&t ,oi&t' to "emembe" about "i'- i' t%at a& 'toc- ca& be 7e" "i'- a' a '%o"t-te"m i&7e'tme&t$ Still itE' ,o''ible) alt%ou.% &ot li-el #o" 'toc-' to ,e"#o"m mi'e"abl ma"-et "i'- i& ma& /a '$ #o" a /%ole decade$ O&e ca& deal /it%
69
$u'ee Cost A"e#aging , Systematic &n"estment Plan:

I# o&e i&7e't' 'ame amou&t o# mo&e eac% mo&t% i& a mutual #u&d) %e i' e&.a.i&. i& MRu,ee +o't A7e"a.i&.$ S%a"e ,"ice' c%a&.e #"om mo&t% to mo&t%) 'o t%at 'et amou&t o# mo&e o&e i&7e't' bu ' di##e"e&t amou&t' o# '%a"e'$
?9
MinimiGing #isk by Ado'ting diffe#ent Management Styles

T%e mo't commo& /a o# le7e"a.i&. t%e "i'-' a' ,e" t%e i&7e'to"' "i'a,,etite /%ic% mo't Mutual #u&d com,a&ie' a"e ado,ti&. t%e'e da ' to att"act mo"e cu'tome"' a' it e&able' t%em to ,"o7ide e;actl i&7e'to"' de'i"e$ /%at
->?-
:lobal Mutual Fund &ndust#y -s &ndian Mutual Fund &ndust#y

T%e I&dia& mutual #u&d' i&du't" %a' bee& ."o/i&. at a %ealt% ,ace o# 3@$>>L #o" t%e la't 4 ea"' /%ic% i' #a" 'u,e"io" a' com,a"ed to t%e ."o/t% "ate #o" t%e /o"ld/ide mutual #u&d i&du't" ) /%ic% %a' bee& a"ou&d 35L i& t%e 'ame ,e"iod$ T%e I&dia& mutual #u&d' i&du't" %a' R' 2=>)=3? c"o"e' /o"t% o# a''et' u&de" ma&a.eme&t a' o& 51t% No7 211@ /%ic% i' a ',ectacula" ."o/t% o# 52L #"om la't ea") T%e ."o/t% ca& be att"ibuted to t%e boomi&. eGuit ma"-et' i& ma8o"it o# t%e cou&t"ie' ac"o'' t%e .lobe$ T%e "i'e %a' bee& %i.%e" i& ca'e o# I&dia becau'e o# t%e com,a"ati7el 'malle" ba'e$ A' o& 51t% Iu&e 1=) /o"ld/ide mutual #u&d' ma&a.e a''et' /o"t% T3@$>3 t"illio&) /%ile I&dia %a' a mea."e 1$22L '%a"e o# t%e /o"ld ma"-et$ EGuit #u&d a''et' "e,"e'e&t >5L o# t%e /o"ld/ide mutual #u&d a''et') /%ile mo&e ma"-et #u&d' a"e 3?L) a&d '%a"e o# bo&d #u&d' 'ta&d' at 21L$ Bala&ced #u&d' "e,"e'e&t ?L o# t%e total a''et'$ T%e I&dia& 'to" i' %o/e7e" Guite di##e"e&t - t%e eGuit #u&d a''et' %a7e #o"med o&l 22L o# t%e total I&dia& i&du't" E' AUM a' o& 51t% Iu&e 1@$ T%i' i' de',ite t%e #act t%at t%e eGuit i&#lo/' i& I&dia %a7e /it&e''ed a 'tu,e&dou' "i'e o# 35>L i& t%e ea" 1=-1@$ T%e eGuit cult %a' bee& ',"eadi&. #a't i& t%e cou&t" a&d i&7e'to"' %a7e 'ta"ted "eco.&i:i&. t%e 'i.&i#ica&ce o# t%e mutual #u&d "oute to e&te" t%e 'toc- ma"-et'$ T%e I&dia& mutual #u&d i&du't" i' mo7i&. to/a"d' t%e i&te"&atio&al t"e&d' /%e"e t%e mutual #u&d' %a7e 7e" %i.% acce,ta&ce le7el a&d a"e ,"e#e""ed o7e" di"ect i&7e'tme&t i& 'toc-'$ T%e %u.e ,a"tici,atio& o# I&dia& i&7e'to"' i& t%e NFO' "ece&tl demo&'t"ate' t%e i&c"ea'ed acce,ta&ce le7el' o# eGuit mutual #u&d' i& t%e cou&t" $ A' o& No7embe" 51) 211@ t%e eGuit a''et' %a7e i&c"ea'ed to almo't 5@L o# t%e total I&dia& mutual #u&d -=1-
a''et' b"i&.i&. it clo'e to t%e .lobal le7el'$ LiGuidC mo&e ma"-et #u&d' com,"i'e o# a la".e ,a"t o# t%e I&dia& mutual #u&d a''et' a&d 'ta&d' at 52L a' com,a"ed to t%ei" /o"ld/ide '%a"e o# 3?L$ La".e i&'titutio&' a&d co",o"ate %ou'e' ,a"- t%ei" 'u",lu' '%o"t te"m #u&d' i& liGuid 'c%eme' a' it ,"o7ide' /it% ta; e##icie&t "etu"&'$ Ao"ld/ide) t%e"e a"e about ==)?21 'c%eme' a&d >3L a"e eGuit -o"ie&ted 'c%eme') /%e"ea' 2>L a"e Bo&d #u&d') 21L a"e bala&cedCmi;ed #u&d') a&d @L a"e mo&e ma"-et #u&d'$ I& I&dia t%e"e a"e >?= 'c%eme' a' o& 51t% No7 1= a&d >2L a"e eGuit -o"ie&ted 'c%eme') >3L a"e Bo&d Fu&d'$ O# t%e'e 'c%eme') t%e la".e" #u&d' %old t%e ma;imum a''et' a' "e7ealed belo/: I& t%e eGuit cate.o" ) to, 31 'c%eme' i& te"m' o# co",u'K %old 22L o# total a''et'$ To, 3= 'c%eme' %old 5=L a&d to, 21 'c%eme' %old >2L$ To, 24 'c%eme' %old mo"e t%a& =1L o# t%e a''et'$ +o&'ide"i&. t%e"e a"e 232 'c%eme' i& t%e eGuit cate.o" t%e domi&a&ce o# 'ome o# t%e to, 'c%eme' i' Guite clea"$ A %a&d#ul o# ,la e"' i& t%e i&du't" ma&a.e a la".e c%u&- o# mo&e a' o# &o/$ But /it% mo"e .lobal a''et ma&a.eme&t com,a&ie' Gueui&. to e&te" t%e I&dia&$ No/ #o" all it' ."o/t% i& la't ea"') t%e ma"-et i' 'till 7e" 'mall a&d "e't"icted bot% i& te"m' o# ,e&et"atio&$ T%e I&du't" #ace' com,etitio& #"om ot%e" t"aditio&al i&7e'tme&t a7e&ue' a' /ell - i&'u"a&ce) ,e&'io& ,la&' a&d ,"o7ide&t #u&d i&7e'tme&t') com,a& de,o'it' a&d #i;ed de,o'it' etc$ T%e I&dia& eGuit ',ace %a' a lo&. /a to .o be#o"e t%e catc% u, /it% t"aditio&al mode o# i&7e'tme&t$ Fo" t%e i&du't" to eme".e a' a ,"e#e""ed i&7e'tme&t 7e%icle #o" t%e commo& i&7e'to") it %a' to o7e"come ot%e" %u"dle' al'o 'uc% a') ,e&et"atio& a&d e;,a&di&. t%e ma"-et "eac%$ T%e e;i'ti&. &et/o"- o# Di't"ibuto"' t%at t%e i&du't" i' %ea7il "elia&t o& i' co&ce&t"ated i& #e/ ma8o" citie' a&d met"o' o&l a&d it %a' to e;,a&d .eo."a,%icall $
-=3-
:old !c%ange T#aded Funds

T%e deci'io& !old E;c%a&.e T"aded Fu&d' /it% F.oldQ a' t%e u&de"l i&. a''et /ill #acilitate bu i&. a&d 'elli&. o# t%e ello/ metal e7e& i& t%e 'malle't o# u&it'$ T%i' i' a /elcome mo7e t%at 'i.&i#ie' I&dia i' catc%i&. u, /it% t%e de7elo,ed ma"-et'$ !old ETF t ,icall i' a& E;c%a&.e T"aded Mutual Fu&d U&it li'ted a&d t"aded o& a 'toc- e;c%a&.e$ !old i' t%e u&de"l i&. a''et #o" t%e u&it' o# t%at #u&d$ E7e" !old ETF U&it "e,"e'e&t' a de#i&ite Gua&tum o# ,u"e .old a&d t%e t"aded ,"ice o# t%at !old U&it mo7e' i& ta&dem /it% t%e ,"ice o# t%e actual .old metal a' i' t"aded i& a& bi. .old me"c%a&t o" i& a& metal e;c%a&.e$ A mutual #u&d %ou'e lau&c%i&. a !old ETF a,,oi&t' Aut%o"i'ed Pa"tici,a&t' /%o i&itiall bu t%e u&it' o# !old ETF #"om t%e mutual #u&d b e;c%a&.i&. actual ,u"e .old #o" t%e u&it' o# !old ETF$ T%e'e Aut%o"i'ed Pa"tici,a&t' #acilitate 'eco&da" ma"-et t"adi&. t%"ou.% o# t%e !old ETF U&it' t%"ou.% t%e Stoc- E;c%a&.e) /%e"e i&7e'to"' ca& bu o" 'ell .old u&it' o& ,a me&t) #o" Gua&titie' a' 'mall a' o&e u&it$ T%e u&de"l i&. a''et U t%at i') .old U i' %eld b a mutual #u&d %ou'e i''ui&. 'uc% u&it' eit%e" i& a ,% 'ical #o"m o" t%"ou.% a F.old "ecei,tQ .i7i&. "i.%t o# o/&e"'%i,$ Aut%o"i'ed ,a"tici,a&t' ca& .o bac- to t%e mutual #u&d %ou'e to "edeem t%e .old ETF U&it' a&d ca& dema&d eGui7ale&t 7alue o# actual ,u"e .old at a& time$
(ow t%e unit '#ice is dete#mined*

Ab"oad) t%e ,"actice /it% .old t"aded #u&d' i' t%at o&e u&it "e,"e'e&t' o&e-te&t% o# a& ou&ce o# ,% 'ical .old$ So i# t%e"e a"e i&7e'to"' i& t%e #u&d /%o %old 31)111 u&it') t%at mea&' t%e #u&d mu't %a7e ,% 'ical .old /o"t% 311 ou&ce'$ A' t%e ,"ice o# .old "i'e' a&d #all') t%e 7alue o# t%e u&it /ill mo7e acco"di&.l $ Iu't li-e a mutual #u&d) t%e 7alue ,e" u&it /ill be t%e total 7alue o# .old %eld di7ided b t%e &umbe" o# u&it') mi&u' t%e e;,e&'e' o# t%e #u&d$ -=2-
0%y in"est in :old TFs*

!OLD ETF /ill ,"o7ide a 'c"ee&-ba'ed ,lat#o"m to i&7e'to"' to accumulate Gualit .old i& 'mall lot'$ !old i' a %ed.e a.ai&'t i&#latio&$ A' i&#latio& "i'e') ou" "u,ee /ill bu ou le'' t%a& /%at it did ea"lie"$ But t%e ,"ice o# .old /ill co&ti&ue to "i'e$ T%at mea&' ou" i&7e'tme&t i& .old doe' &ot lo'e it' 7alueK it' 7alue could i&c"ea'e$ !old %a' ,"o7e& to be a .ood %ed.e a.ai&'t i&#latio& a&d mai&tai&ed a lo&.-te"m 7alue$ !old i' &ot %i.%l co""elated /it% ot%e" #i&a&cial a''et' 'uc% a' 'toc-') cu""e&c a&d bo&d') /%ic% a"e di"ectl a##ected b t%e cou&t" Q' eco&om $ 6e&ce) it o##e"' a .ood di7e"'i#icatio& a&d "educe' o7e"all "i'-C7olatilit o# i&7e'tme&t'$ !old %a' a "ead a&d /ide acce,tabilit $ 6e&ce) e;c%a&.i&. it #o" ca'% o" "ai'i&. mo&e a.ai&'t .old i' ea'ie"$
-=5-
T%e +SS Ad"antage.

Ta; Sa7i&.' i' a 7e" im,o"ta&t ,a"t o# #i&a&cial ,la&&i&.$ Po't ta; "etu"&' a"e /%at "eall matte"' at t%e e&d o# t%e da a' t%e "eal i&come #"om i&7e'tme&t' come' #"om /%at ou ea"& a#te" ,a i&. all ta;e'$ EGuit Li&-ed Sa7i&.' Sc%eme' (ELSS* i' a& ideal /a to 'a7e o& ta; a' /ell a' 'ta i&. i&7e'ted i& eGuit mutual #u&d'$ ELSS 'c%eme' %a7e bee& i&t"oduced i& I&dia to ,"omote i&7e'tme&t' i& eGuit ma"-et' b .i7i&. ta; co&ce''io&' to t%e i&7e'to"'$ ELSS i' ba'icall eGuit -di7e"'i#ied 'c%eme a&d %a' a loc- i& ,e"iod o# t%"ee- ea"'$ Ri'i&. i&#latio& a&d u&ce"tai&t o& t%e i&te"e't "ate #"o&t %a7e tu"&ed debt #u&d' i& to lac-lu't"e$ I&te"e't "ate' o& ot%e" i&7e'tme&t a7e&ue' 'uc% a' ba&- de,o'it' a"e ieldi&. lo/e" "etu"&' a&d %e&ce o&e ca&&ot a7oid i&7e'ti&. i& eGuitie'$ T%u' o&e ca& 'a7e o& ta; a' /ell a' ea"& %i.% "etu"&' b i&7e'ti&. i& ELSS$ O7e" a lo&.-te"m) "etu"& #"om eGuitie' .et 'moot%e&ed a&d %a7e beate& "etu"&' o& t%e debt 'ide$ T%u' ELSS i' a& ideal o,tio& #o" i&7e'to"' /%o a"e co&'ide"i&. i&7e'ti&. i& eGuit mutual #u&d' #o" a lo&.-te"m %o"i:o&$ Fo" t%e #i"'t time) debt a&d eGuit a"e bei&. t"eated o& ,a" #o" t%e ,u",o'e o# ta; ,la&&i&.$ I# o&e i' i&cli&ed to/a"d' eGuitie') a' ou '%ould be i& ci"cum'ta&ce' /%e"e ,o't-ta; debt "etu"&' ba"el beat i&#latio&) ELSS '%ould ,la a bi..e" "ole i& o&e' ,o"t#olio$ T%e combi&e t%e u&matc%ed ."o/t% ,ote&tial o# eGuitie' /it% t%e be't ta; 'a7i&.' ,o''ible u&de" t%e &e/ "ule'$
-=>-
&ncome Funds "s. )onds , Debentu#es

+iDuidity:
I&7e'to"' i&7e'ti&. i& debe&tu"e' a&d bo&d' %a7e to loc- i& t%ei" mo&e #o" a ,a"ticula" ,e"iod o# time ba'ed o& t%e matu"it o# t%e i&'t"ume&t$ Some i&'t"ume&t' do ,"o7ide i&7e'to"' /it% a& ea"l e;it o,tio& i& te"m' o# a ,ut a&d call o,tio& o" li'ti&. o& t%e 'toc- e;c%a&.e'$ But t%i' #acilit i' &ot al/a ' be&e#icial to t%e i&7e'to" i& t%e "eal /o"ld$ I& t%e ca'e o# t%e ,ut a&d call o,tio&) t%e i&7e'to" %a' a& o,tio& to e;it o&l at ce"tai& ',eci#ic time i&te"7al'$ Fu"t%e"mo"e) 7e" #e/ i&'t"ume&t' o##e" t%i' #acilit $ O& t%e ot%e" %a&d i&7e'to"' i&7e'ti&. i& a& I&come Fu&d ca& "edeem t%ei" u&it' /%e&e7e" t%e /a&t) a&d &o"mall t%e "edem,tio& c%eGue' a"e .i7e& /it%i& t%"ee bu'i&e'' da '$
C%ange in inte#est #ate:

I&7e'tme&t' i& debe&tu"e a&d bo&d' a"e loc-ed i& at t%e i&te"e't "ate at /%ic% t%e i''ue" i''ue' t%e i&'t"ume&t'$ T%e i&7e'to" doe' &ot .et t%e be&e#it o# a c%a&.e i& t%e i&te"e't "ate 'ce&a"io i# t%e i&'t"ume&t' a"e &ot li'ted o& t%e 'toce;c%a&.e$ I& t%e #alli&. i&te"e't "ate 'ce&a"io it ma-e' mo"e i&7e'tme&t 'e&'e to ,ut mo&e i& t%e I&come Fu&d' /%ic% .i7e' i&7e'to"' t%e be&e#it o# #alli&. i&te"e't "ate' i& te"m' o# i&c"ea'e i& t%e 7alue o# t%e u&de"l i&. a''et' (i$e$ debt i&'t"ume&t' bou.%t* a' com,a"ed to loc-i&. i& t%e i&7e'tme&t at a ,a"ticula" i&te"e't "ate #o" a lo&. ,e"iod
&dle money:
Fo" i&7e'to"' i&7e'ti&. i& t%e debe&tu"e' a&d bo&d' t%e"e i' a la. bet/ee& t%e matu"it o# t%e ea"lie" i&7e'tme&t a&d "ei&7e'tme&t' i& a #"e'% i''ue$ 6e&ce t%e"e i' a& i&te"mitte&t ,e"iod /%e& t%e mo&e doe' &ot ea"& a& i&te"e't o" lie' idle$ -==-
T%at /ould &ot be t%e ca'e /it% i&come #u&d'$ 6e"e a& i&7e'to" ca& ma-e ,u"c%a'e' /%e&e7e" %e /a&t' to$ It e7e& .i7e' i&7e'to"' t%e be&e#it o# ,a"t "edem,tio& i# %e &eed' it #o" a& i&te"mitte&t ,e"iod$
Matu#ity and Huality of Debt:

A%e& a& i&7e'to" ma-e' i&7e'tme&t' i& t%e debe&tu"e o" bo&d') t%e i&7e'to" %a' to acce'' t%e matu"it a&d Gualit o# t%e debt i''ue a&d t%e i''ue"$ Ait% t%e mo&e i&7ol7ed bei&. %i.% i& eac% i''ue it i' di##icult #o" t%e i&7e'to" to al/a ' di7e"'i# a&d t%e i&7e'to" e&d' u, co&ce&t"ati&. %i' i&7e'tme&t' - a cla''ic ca'e o# ,utti&. all t%e e..' i& o&e ba'-et$ A%e& a& i&7e'to" "oute' t%e mo&e i& a& I&come Fu&d t%e o&u' o# c%ec-i&. t%e c"edit Gualit a&d ma&a.i&. t%e matu"it ,"o#ile o# t%e debt 'o a' to ,"o7ide liGuidit to t%e i&7e'to"' "e't' /it% t%e #u&d ma&a.e" a&d t%e #u&d %ou'e$
&ncome Funds -s Fi!ed De'osits.

Safety: )ank Fi!ed De'osits E Mo't o# t%e i&7e'to"' belie7e t%at t%e ba&- #i;ed
de,o'it' a"e 'a#e$ T%i' t"ue - but o&l to 'ome e;te&t$ Ba&- #i;ed de,o'it' a"e i&'u"ed u,to R'$3 la-%$ Be o&d t%i' 7alue) t%e "i'- o# lo'' o# ca,ital a&d i&te"e't i' /it% t%e de,o'ito"$ Fu"t%e"mo"e) t%i' .ua"a&tee i' o&l a7ailable to t%o'e ba&-') /%ic% ,a t%e &ece''a" ,"emium #o" t%i' #acilit to it' de,o'ito"'$ So) o&e' mo&e i' .ua"a&teed u,to R'$ 3 la-% a&d be o&d t%at) o&e ca""ie' /%ate7e" "i't%e"e ma be$
&ncome Fund Offe#ed by Mutual Funds E A%e& o&e i&7e't i& t%e i&come
#u&d' ma&a.ed b mutual #u&d') t%e a"e ,utti&. t%ei" mo&e /it% ,"o#e''io&al mo&e ma&a.e"') /%o do com,lete c"edit a&al 'i' o# t%e 'ecu"itie' a&d com,a&ie' i& /%ic% t%e i&7e't a&d i&te"e't "ate a&al 'i' ba'ed o& t%e I&dia& -=@-
a&d .lobal eco&om $ T%e mo&e ) /%ic% i' i&7e'ted) belo&.' to t%e i&7e'to"' a&d t%e NAH (&et a''et 7alue* decla"ed o& t%e dail ba'i' i' t%e 7aluatio& o# ou" %oldi&.' o& t%at da a&d t%e #u&d i' liable to ,a /%ic% i' ,"o#e''io&all ma&a.ed b ou t%at mo&e i# o&e 8ob i' "edeem' %i' i&7e'tme&t$ T%u' o&e i' com,letel i& co&t"ol o# %i' i&7e'tme&t ) a #u&d ma&a.e" /%o'e o&l ma&a.i&. a''et' da -i& a&d da -out$
Notional $etu#ns on &n"estment:

Notio&al "etu"& o& i&7e'tme&t i' t%e "etu"& t%at ou" i&7e'tme&t ea"&' but t%at i' &ot /%at /e actuall .et i&to ou" %a&d' due to ta;e' a,,licable o& ou" "etu"&'$
)ank Fi!ed De'osits 1 T%e "etu"& o& i&7e'tme&t i& t%e ba&- #i;ed de,o'it i'
#i;ed at t%e "ate at /%ic% /e %a7e ,ut ou" mo&e $ No matte" %o/ t%e i&te"e't "ate mo7e' (eit%e" u, o" do/&* i& t%e eco&om /e a"e a''u"ed o# t%e i&te"e't "ate t%at /e a"e .oi&. to "ecei7e till t%e ,e"iod t%at /e %a7e a."eed u,o& at t%e time o# ou" de,o'it$
&ncome Fund Offe#ed by Mutual Funds 1 T%e "etu"&' o& t%e i&7e'tme&t i&
t%e u&de"l i&. a''et' o# t%e i&come #u&d' (i$e$ 'ecu"itie' bou.%t b t%e #u&d e$.$ .o7e"&me&t 'ecu"itie') t"ea'u" bill' etc* a"e i& t/o /a ' 7i:$ (3*$I&te"e't "ecei7ed o& t%e 'ecu"itie' a.ai&'t /%ic% t%e mo&e /a' le&t (i$e$ t%e "ate at /%ic% t%e #u&d le&d' t%e mo&e to t%e bo""o/e"$ (2*$ +a,ital A,,"eciatio& i& t%e 7alue o# t%e 'ecu"itie' i& t%e /%ole'ale debt ma"-et$ A%e& i&te"e't "ate' "i'e') t%e ma"-et 7alue o# .o7e"&me&t 'ecu"itie'Cbo&d' #all$ A%e& i&te"e't "ate' d"o, t%e ma"-et 7alue' o# .o7e"&me&t 'ecu"itie'Cbo&d' "i'e'$ T%e ma.&itude o# c%a&.e de,e&d' o& #acto"' /%ic% i&clude le&.t% o# matu"it ) "ati&. a&d 7a"iable' "elati&. to a ',eci#ic i''ue") t%e
-=2-
i&du't"
etc$ 6e&ce i& t%e c%a&.i&. i&te"e't "ate 'ce&a"io t%e i&come #u&d
i&7e'to"' "ecei7e t/o #old be&e#it) o&e #"om t%e i&te"e't o& mo&e le&t a&d 'eco&d #"om t%e ca,ital a,,"eciatio& o# t%e 'ecu"itie' (i& t%e /%ole'ale debt ma"-et* a.ai&'t t%e mo&e le&t$
$eal 3Actual9 #etu#ns:

T%i' i' t%e "etu"& t%at /e a' a& i&7e'to" actuall .et i& ou" %a&d' a#te" deductio& o# ta;$
)ank Fi!ed De'osits 1 T%e i&te"e't "ecei7ed o& t%e ba&- #i;ed de,o'it' i'
liable to TDS (ta; deductio& at 'ou"ce* a&d t%e i&te"e't i&come .et' clubbed /it% t%e &o"mal i&come o# t%e i&7e'to"'
&ncome Fund Offe#ed by Mutual Funds 1 T%e "etu"&' t%at t%e i&7e'to"
"ecei7e' #"om %i' i&7e'tme&t (u&it'* i& t%e Mutual Fu&d a"e eit%e" i& t%e #o"m o# di7ide&d a&dCo" i& t%e #o"m o# ca,ital a,,"eciatio&$ I& ca'e t%e i&7e'to" "ecei7e' t%e "etu"&' o& %i' i&7e'tme&t i& t%e #o"m o# di7ide&d ,a out t%a& %e i' &ot liable to ,a a& ta; ('i&ce t%e di7ide&d' a"e ta; #"ee i& t%e %a&d' o# t%e i&7e'to"*$ I& ca'e %e "ecei7e' "etu"&' i& t%e #o"m o# ca,ital a,,"eciatio& t%a& %e ca& ta-e ad7a&ta.e o# t%e be&e#it' o# i&de;atio&$
Mutual Fund "s. Duities

Mutual Fu&d' 7'$ EGuitie' - A millio& dolla" Gue'tio&$ A% '%ould /e &ot di"ectl i&to eGuitie' i&'tead o# .oi&. t%"ou.% t%e /a o# mutual #u&d'B A#te" all) /%at doe' a #u&d ma&a.e" doe') %e too i&7e't' ou" mo&e i& eGuitie'$ T%e& /% '%ould /e ,a t%e c%a".e' #o" t%at$ T%e ad7a&ta.e' o# u'i&. mutual #u&d' "oute to i&7e't i& eGuitie' ca& be b"ie#l 'ummed u, i& t%e #ollo/i&. ,oi&t' 0 Di"e#sification. w%ic% #educes #isk 3-olatility9: -=4-
Mutual #u&d' i&7e't ou" mo&e i& di7e"'i#ied 'ecto"'$ I& ca'e /e a"e di"ectl i&7e'ti&. i& eGuitie') itE' &ot ,o''ible to di7e"'i# ou" ,o"t#olio a' muc% a' a mutual #u&d ca& do$ Mutual #u&d ca& i&7e't t%e mo&e i& 7a"iou' 'ecto"') a&d t%at /ould ma-e t%e i&7e'tme&t o& a b"oade" ba'i'$ Remembe": Di7e"'i#icatio& "educe' Ri'-$ P#o"ides in"esto# t%e access to '#ofessional fund management e!'e#tise: I&7e'tme&t i' 7e" com,licated #ield$ I&7e'tme&t i' 7e" 'imila" to ',eculati&.$ But ea"&i&. t%"ou.% ',eculatio&' a&d ea"&i&. t%"ou.% ,"o,e" i&7e'tme&t a"e t/o di##e"e&t /a '$ A 7e" #amou' Guote 'a ': MA ,e"'o& '%ould &ot ',eculate t/o time' i& %i' li#e$ 3$ A%e& %e ca&Et a##o"d to$ 2$ A%e& %e ca&$ Ait% t%e %el, o# mutual #u&d') a ,e"'o& .et' t%e ',eciali'ed -&o/led.e a&d e;,e"ie&ce o# ,"o#e''io&al' /%ic% i& "etu"& %el,' %im u&de"'ta&d %e ma"-et bette" a&d .e&e"ate .ood "etu"&'$ Ta! efficiency: Ta; - A 7e" im,o"ta&t ,oi&t /%ile ma-i&. i&7e'tme&t$ I&7e'tme&t i' ma& a time made #o" t%e 'a-e #o" .etti&. ta; be&e#it'$ Mutual #u&d' .i7e t%e i&7e'to" "etu"&' a' /ell a' o,timum ta; be&e#it'$ Acti"e management: A' me&tio&ed ea"lie") mutual #u&d' a"e ma&a.ed b t%e 7olatilit %i.%l Guali#ied ,"o#e''io&al) /%o a"e i& t%e #ield 'i&ce a lo&.e" ,e"iod o# time$ T%e u&de"'ta&d o# t%e ma"-et muc% bette" t%e& a &o"mal i&7e'to"$ T%e ma&a.eme&t &eed' to be 'ma"t a' /ell a' acti7e$ Fle!ibility , +ow minimum in"estment: -=?-
T%e mo't im,o"ta&t be&e#it /%ic% /e ca& 'a $ A%ile i&7e'ti&. i& eGuitie' o&e &eed' to %a7e 'ou&d amou&t o# mo&e #o" .ai&i&. 'ome comme&dable ,"o#it$ A 'mall i&7e'to" ca&Et .o #o" a bi. bet$ But i& mutual #u&d') a' t%e mo&e i' ,ooled i& to.et%e") 'o a lo/ i&7e'tme&t al'o ma-e' lot' o# di##e"e&ce$ Be'ide' t%i' t%e i&7e'to" al'o e&8o ' t%e #le;ibilit $ T#ans'a#ency A' mutual #u&d' a"e "e.ulated b SEBI .uideli&e') ,"o,e" deco"um a&d dece&c i& mai&tai&ed$ I&7e'tme&t i' 7e" t"a&',a"e&t a& i&7e'to" %a' #ull i&#o"matio& about %i' i&7e'tme&t made$ P"o,e" docume&tatio&' a"e do&e a&d "e,o"t' a"e 'e&d to t%e i&7e'to" Timel
$
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New Conce'ts.
De#i"ati"es in Mutual Funds:
T%e I&dia& "e.ulato"' %a7e '%o/& i&te&tio&' o# 'lo/l but 'u"el "ela;i&. t%e #"ame/o"- i& #a7ou" o# Mutual Fu&d'$ P"o,o'al' li-e allo/i&. MF to '%o"t-'ell 'ecu"itie') t"adi&. i& de"i7ati7e') allo/i&. i&7e'tme&t i& !old) a&d mo"e "ece&tl "ela;i&. "ule' "e.a"di&. i&7e'tme&t i& #o"ei.& eGuit a"e all 'te,' i& t%e "i.%t di"ectio&'$ Dome'tic Mutual #u&d i&du't" i& t%e "ece&t time' %a7e eme".ed a' a 't"o&. i&7e'tme&t a7e&ue) i& a la&d domi&ated b t"aditio&al i&7e'tme&t ,"oduct'- a&d #o" t%e mome&tum to co&ti&ue it i' &ece''a" t%at mo"e libe"al outloo- i' ,ut i& ,lace to "eall allo/ t%e i&du't" to ',"ead it' /i&.'$ Mutual #u&d' /e"e allo/ed to t"ade i& de"i7ati7e' b t%e "e.ulato"' to o&l %ed.e a.ai&'t t%e "i'- i& t%e ,o"t#olio) a&d o# all t%e c%a&.e' ,"o,o'ed clea"l allo/i&. u&"e't"icted t"adi&. i& de"i7ati7e' i' t%e mo't e;citi&.) becau'e o# t%e #le;ibilit it o##e"'$ A #u&d i' &ot allo/ed to$ 6ed.e a di7e"'i#ied ,o"t#olio u'i&. a 'ecto"al i&de;) becau'e it i' &ot a& e##ecti7e %ed.e$ Simila"l ) a '%o"t ,o'itio& i& ot%e" 'toc-') /%ic% do &ot #o"m ,a"t o# t%e ,o"t#olio) /ould &ot be allo/ed$
0%y De#i"ati"es in Mutual Fund*

Fu&d ma&a.e" de,e&di&. u,o& %i' 7ie/ o# t%e ma"-et') a' /ell a' a& a"bit"a.e o,,o"tu&itie' ma c%oo'e to %a7e a ,o'itio& i& de"i7ati7e' a&dCo" u&de"l i&. 'ecu"itie'$ SEBI 7ie/ i' t%at MF %a' a& o&u' to c"eate t%ei" ,"e#e""ed ,o'itio& i& t%e mo't co't-e##ecti7e ma&&e") t%"ou.% u'e o# ca'% ma"-et') de"i7ati7e' ma"-et' o" bot%$ De"i7ati7e' a&d '%o"t 'elli&. ,"o7ide a7e&ue to ma-e mo&e e7e& /%e& t%e ma"-et' #all o" mo7e 'ide/a '$ S%o"t 'elli&. i' bei&. co&tem,lated a&d o&ce allo/ed /ould .i7e t%e #u&d ma&a.e"' a lot mo"e #le;ibilit $ T%e ,ote&tial a&d
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t%e ad7a&ta.e' t%at t%i' a7e&ue .i7e' to t%e #u&d ma&a.e" a"e imme&'e a&d 'ome i&du't" ,la e"' %a7e al"ead d"a/& u, ,la&' #o" a 'e,a"ate cla'' o# ,"oduct /%ic% #ocu'e' e&ti"el b"a&c% out i& ot%e" a"ea' a' /ell$ o& i&7e'tme&t i& de"i7ati7e' 'e.me&t) /it% acti7e ,o'itio&' i& t%e ca'% 'e.me&t) /%ic% /ill e7e&tuall %el, t%e i&du't" to
Fund Of Funds3FoF9:
Fu&d o# Fu&d' ,"o7ide a u&iGue a',ect o# i&7e'ti&. a&d o##e"' 7a"iou' be&e#it' li-e ."eate" di7e"'i#icatio&) "educed "i'-') ea'e i& #u&d 'electio& etc$ but it %a' et to ac%ie7e "eGui'ite i&7e'to" ,a"tici,atio& i& I&dia$ A FoF i' a mutual #u&d 'c%eme t%at i&7e't' ,"ima"il i& ot%e" 'c%eme' o# t%e 'ame mutual #u&d %ou'e o" 'c%eme' #loated b ot%e" mutual #u&d' %ou'e' - 8u't a' a mutual #u&d i&7e't' i& a &umbe" o# di##e"e&t 'ecu"itie'- a FoF %old' u&it' o# di##e"e&t mutual #u&d 'c%eme'$ FT I&dia D &amic PE Ratio Fu&d o# Fu&d' /a' t%e #i"'t e7e" Fu&d o# Fu&d' (FoF* lau&c%ed i& I&dia i& 2115 a&d it %a' ."o/& at a +A!R o# a"ou&d 5=L) /%ic% i' dece&t b all 'ta&da"d') but cu""e&tl t%e"e a"e o&l 2 FoF' 'c%eme' i& t%e cou&t" $ T%e i&du't" i& it' bid to mobili:e a' muc% mo&e a' ,o''ible %a' lau&c%ed eGuit 'c%eme' o&e a#te" t%e ot%e") but 'adl t%i' cate.o" o# 'c%eme' i& ',ite o# t%e imme&'e be&e#it' it ,"o7ide' to it' i&7e'to"' i' a &e.lected lot$ !loball ) t%e co&ce,t i' 7e" ,o,ula" o/i&. to t%e be&e#it' it ca""ie' but it %a' et to .ai& due "eco.&itio& i& I&dia$ P"ima"il %a7e bee& lo/e" t%a& t%e "etu"&' deli7e"ed b t%"ee "ea'o&' %a7e bee& eGuit di7e"'i#ied 'c%eme'$ "e',o&'ible #o" FoF' mode't ."o/t%$ Fi"'tl t%e "etu"&' ,o'ted b FoF 'c%eme' Seco&dl ) t%e co't i&clu'i7e o# t%e load' a&d e;,e&'e' a"e o& t%e %i.%e" 'ide /%e& com,a"ed to ot%e" eGuit #u&d') a' i&7e'to"' %a7e to bea" t%e "ecu""i&. e;,e&'e' o# t%e 'c%eme i& additio& to t%e e;,e&'e' o# u&de"l i&. 'c%eme$ T%i"dl ) t%e di##e"e&tial ta; t"eatme&t bet/ee& eGuit #u&d' a&d FoF %a' al'o
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i&%ibited t%ei" ."o/t%$ Mutual Fu&d i&du't"
/a' %o,i&. #o" 'imila" ta;
t"eatme&t i& ca'e o# FoF #o" Guite 'ome time but t%e "ece&t bud.et too %a' o7e"loo-ed t%i' a',ect$ +u""e&tl eGuit -o"ie&ted FoF ,a di7ide&d di't"ibutio& ta; (DDT* o# 3>$15 ,e" ce&t) /%ile eGuit -o"ie&ted #u&d' a"e e;em,ted$ FoF al'o do &ot o##e" lo&.-te"m ca,ital .ai&' ta; e;em,tio&) e7e& i# t%e a"e eGuit o"ie&ted$ A' t%e ,e"#o"ma&ce o# t%e FoF' de,e&d' o& t%e ,e"#o"ma&ce o# t%e u&de"l i&. 'c%eme 'o i& o"de" to e;,loit it' t"ue ,ote&tial t%e #u&d ma&a.e" %a' to be 7e" a'tute /%ile 'electi&. t%e 'c%eme' ac"o'' t%e #u&d %ou'e'$ 6o/e7e") i& I&dia) #u&d %ou'e' %a7e co&ce&t"ated i& i&7e'ti&. i& #u&d' #"om t%ei" o/& 'table) /%ic% %a' "e't"icted t%ei" ,e"#o"ma&ce$ A,a"t #"om 9ota- Mutual Fu&d) Sta&da"d +%a"te"ed a&d Fidelit ) all ot%e" #u&d %ou'e' o##e"i&. FoF 'c%eme' a"e i&7e'ti&. i& t%e 'c%eme' #"om t%ei" o/& AM+$ Rece&tl #u&d-o#-#u&d' co&ce,t$ T%e FoF o##e"ed i& I&dia .e&e"all a"e a''et-allocatio& FoF' a&d t%u' te&d to be % b"id i& &atu"e$ Fidelit "ece&tl lau&c%ed a Multi-Ma&a.e" +a'% FoF i&7e'ti&. o&l i& liGuid 'c%eme' o# 7a"iou' mutual #u&d'$ IN! H ' a %a' lau&c%ed a 'e,a"ate di7i'io& called O,timi; t%at /ill #ollo/ t%e multima&a.e"
(ig%e# o# +owe# NA- 1 Any diffe#ence*

Some o# t%e i&7e'to"' %a7e t%e te&de&c to ,"e#e" a 'c%eme t%at i' a7ailable at lo/e" NAH com,a"ed to t%e o&e a7ailable at %i.%e" NAH$ Sometime') t%e ,"e#e" a &e/ 'c%eme /%ic% i' i''ui&. u&it' at R'$ 31 /%e"ea' t%e e;i'ti&. 'c%eme' i& t%e 'ame cate.o" a"e a7ailable at muc% %i.%e" NAH'$ I&7e'to"' ma ,lea'e &ote t%at i& ca'e o# mutual #u&d' 'c%eme') lo/e" o" %i.%e" NAH' o# 'imila" t ,e 'c%eme' o# di##e"e&t mutual #u&d' %a7e &o "ele7a&ce$ O& t%e ot%e" %a&d) i&7e'to"' '%ould c%oo'e a 'c%eme ba'ed o& it' me"it co&'ide"i&. -@5-
,e"#o"ma&ce t"ac- "eco"d o# t%e mutual #u&d) 'e"7ice 'ta&da"d') ,"o#e''io&al ma&a.eme&t) etc$ T%i' i' e;,lai&ed i& a& e;am,le .i7e& belo/$ Su,,o'e 'c%eme A i' a7ailable at a NAH o# R'$3= a&d a&ot%e" 'c%eme B at R'$?1$ Bot% 'c%eme' a"e di7e"'i#ied eGuit o"ie&ted 'c%eme'$ I&7e'to" %a' ,ut R'$ ?)111 i& eac% o# t%e t/o 'c%eme'$ 6e /ould .et @11 u&it' (?111C3=* i& 'c%eme A a&d 311 u&it' (?111C?1* i& 'c%eme B$ A''umi&. t%at t%e ma"-et' .o u, b 31 ,e" ce&t a&d bot% t%e 'c%eme' ,e"#o"m eGuall /ell a&d it i' "e#lected i& t%ei" NAH'$ NAH o# 'c%eme A /ould .o u, to R'$ 3@$=1 a&d t%at o# 'c%eme B to R'$ ??$ T%u') t%e ma"-et 7alue o# i&7e'tme&t' /ould be R'$ ?)?11 (@11R 3@$=1* i& 'c%eme A a&d it /ould be t%e 'ame amou&t o# R'$ ??11 i& 'c%eme B (311R??*$ T%e i&7e'to" /ould .et t%e 'ame "etu"& o# 31L o& %i' i&7e'tme&t i& eac% o# t%e 'c%eme'$ T%u') lo/e" o" %i.%e" NAH o# t%e 'c%eme' a&d allotme&t o# %i.%e" o" lo/e" &umbe" o# u&it' /it%i& t%e amou&t a& i&7e'to" i' /illi&. to i&7e't) '%ould &ot be t%e #acto"' #o" ma-i&. i&7e'tme&t deci'io&$ Li-e/i'e) i# a &e/ eGuit o"ie&ted 'c%eme i' bei&. o##e"ed at R'$31 a&d a& e;i'ti&. 'c%eme i' a7ailable #o" R'$ ?1) '%ould &ot be a #acto" #o" deci'io& ma-i&. b t%e i&7e'to"$
Fund Selection:
Selecting t%e Duity Funds:
Ste' One: +la''i# t%e a7ailable eGuit 'c%eme' i& !"o/t%) Halue) EGuit I&come) B"oad -ba'ed S,ecialt a&d +o&ce&t"ated S,ecialt #u&d'$ T%e ,u",o'e o# cla''i#icatio& i' to decide /%et%e" t%e i&7e'tme&t ob8ecti7e o# t%e #u&d 'uit' t%e i&7e'to"E' &eed' a' t"a&'lated i& t%e model ,o"t#olio$ It i' ea' to ma-e t%e mi'ta-e o# loo-i&. o&l at t%e ,a't ,e"#o"ma&ce o# a #u&d a&d i.&o"i&. it' 'uitabilit #o" t%e i&7e'to"$ Fo" e;am,le) &o matte" %o/ .ood ,e"#o"ma&ce o# a ',ecialt o##'%o"e o" i&du't" #u&d) it /ould &ot be ad7i'able #o" t%e co&'e"7ati7e eGuit ,o"t#olio o# a "eti"ee$
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Ste' Two: +%oo'e o&e o# t/o 't"ate.ie' - eit%e" (3$* Select mai&'t"eam ."o/t% o" 7alue #u&d') ,"o7idi&. b"oad di7e"'i#icatio&$ O" (2* Select eit%e" a di##e"e&tiated ."o/t% o" 7alue #u&d o" a ',ecialt #u&d /%o'e "i'-' a&d "etu"&' /ill 7a" #"om t%e o7e"all ma"-et$ Fo" a ou&. i&7e'to") a ."o/t% #u&d -be ,"e#e"able to a& eGuit i&come #u&d) mo"e 'uited to a& Qolde" i&7e'to"$ Ste' T%#ee: E7aluate ,a't "etu"&' o# a7ailable #u&d' i& eac% cate.o" mai&'t"eam) eGuit i&come o" e7e& i&de; #u&d) o" %i.% "i'-C"e/a"d ',ecialt #u&d$ Ste' Fou#: Re7ie/ t%e 'alie&t #eatu"e' o# a 'c%eme$ SEBI i& I&dia "eGui"e' t%e O##e" Docume&t o# &e/ 'c%eme' to %i.%li.%t t%e "i'- #acto" t%at a #u&dQ' ,a't ,e"#o"ma&ce i' &o .uide to t%e #utu"e i' im,o"ta&t to "emembe"$ +o&'ide" a &e/ 'c%eme o" a &e/ Bala&ced Fu&d #"om a #u&d ma&a.e" /%o %a' o##e"ed 'ucce''#ul eGuit o" debt #u&d' o" e7e& a &e/ i&de; #u&d$ Po"t#olio Ma&a.e"Q' E;,e"ie&ce: It i' .ood to -&o/ /%o ma&a.e' t%e ,o"t#olio) %o/ lo&.$ 6e %a' ma&a.ed it) a&d /%at %i' ,e"#o"ma&ce t"ac- "eco"d i'$ -
Po#tfolio C%a#acte#istics:
I$ Cas% Position: EGuit #u&d' /ould &o"mall %old little ca'%$ Too muc% ca'% mea&' ,a i&. 'ome/%at e;ce''i7e ma&a.eme&t #ee' to t%e #u&d ma&a.e"$ 6o/e7e") loo- at /%et%e" t%e ma&a.e" %a' 'ucce''#ull ,"edicted u,-ma"-et mo7e' b ,%a'e'$ II$ Po#tfolio Statistics: A%ile 'electi&. a #u&d) ou &eed to com,a"e it' ,e"#o"ma&ce /it% ot%e"'$ To e&'u"e a ,"o,e" com,a"i'o&) loo- at t%e'e mea'u"e': t%e "elati7e "etu"&) !"o'' Di7ide&d Yield) t%e "i'- a&d &et "etu"&' to t%e i&7e'to"$ III$ Po#tfolio Concent#ation: +%ec- t%e #u&dQ' la".e't te& %oldi&.' - t%ei" %oldi&. ca'% be#o"e 'uc% bull ma"-et
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,"o,o"tio& i& t%e #u&dQ' &et a''et'$ I' t%e co&ce&t"atio& i& li&e /it% t%e 'tated ob8ecti7e o# t%e #u&dB Te& la".e't %oldi&.' accou&ti&. #o" o7e" =1L o# t%e &et a''et' mea&' t%e #u&d i' co&ce&t"ated) &ot di7e"'i#ied$ IH$ Ma#ket Ca'italiGation of t%e Fund: Iud.e t%e #u&dQ' 't"ate. b t%e 'i:e o# t%e ma"-et ca, o# it' eGuit %oldi&.' - doe' it %a7e la".e-ca,) blue c%i, '%a"e' o" eme".i&. 'mall-ca, '%a"e'B T%e ma"-et ca, al'o i&dicate' t%e le7el o# "i'-' a''umed$ Relate t%i' i&#o"matio& to t%e #u&d ob8ecti7e' a&d co&'i'te&c o# it' ,e"#o"ma&ce$ H$ Po#tfolio Tu#no"e#: A 'tead %oldi&. o# i&7e'tme&t' i&dicate' a lo&.te"m o"ie&tatio&$ La".e" tu"&o7e" - ,u"c%a'e' a&d 'ale' - could .e&e"ate %i.%e" ca,ital .ai&' but al'o %i.%e" t"a&'actio& co't' #o" t%e #u&d$
Selecting a Debt, )ond, &ncome Fund:

3* Na##ow Down t%e C%oice: Debt #u&d' %a7e a la".e" 7a"iet to c%oo'e #"om t%a& eGuit #u&d'$ T%e debt #u&d' ma %a7e '%o"t) i&te"mediate a&d lo&.-te"m ,o"t#olio'$ T%e ma i&7e't i& .o7e"&me&t 'ecu"itie') co",o"ate debe&tu"e' a&d bo&d' - i&7e'tme&t ."ade o" belo/) Fi&a&cial I&'titutio& bo&d') 'tate o" e7e& mu&ici,al le7el bo&d') o" .lobal bo&d'$ Cnow Iou# &n"esto# Ob/ecti"e: Fo" ou&. i&7e'to"' doi&. "eti"eme&t
2*
,la&&i&.) lo&.te"m bo&d #u&d' a"e a,,"o,"iate$ But) #o" "eti"ed ,e"'o&') mo&t%l i&come 'c%eme' a"e mo"e a,,"o,"iate$
=9
Dete#mine t%e $ig%t Selection C#ite#ia and select: Fu&d A.e a&d Si:e- Due to e;,licit ob8ecti7e' o# a debt #u&d) u&li-e eGuit #u&d') t%e"e i' &o %a"m i& i&7e'ti&. i& &e/ #u&d') t%ou.% t%e #u&d ma&a.e"Q' t"ac- "eco"d i' "ele7a&t to co&'ide"$ Be ca"e#ul o# #u&d' t%at i&7e't i& a' et u&-&o/& o" &e/ i&'t"ume&t'$ Simila"l ) t%e te&u"e o# t%e ,o"t#olio ma&a.e" i' al'o le'' im,o"ta&t #o" -@@-
bo&d #u&d' t%a& #o" eGuit #u&d'$ Relati7e Yield'- I# a& i&7e'to" &eed' i&come 'elect' a #u&d /it% %i.% cu""e&t ield (#u&d di7ide&d' a' ,e"ce&ta.e o# it' ma"-et 7alue*$ But) a debt #u&d al'o %a' a ield to matu"it - #i&d it out$ YTM i' im,o"ta&t) i# t%e ob8ecti7e i' total "etu"&) &ot 8u't cu""e&t i&come$ I& a decli&i&. i&te"e't-"ate e&7i"o&me&t) a #u&d ma %old %i.% cou,o& ,"emium bo&d') /%o'e ,"i&ci,al 7alue /ill decli&e /%e& i&te"e't "ate' "i'e) cau'i&. a ca,ital lo'' a&d a lo/e" total "etu"&$ +o't': Mo"e t%a& a& eGuit #u&d) a bo&d #u&d o,e"ate' i& &a""o/ i&come ma".i&'$ Fo" a bo&d #u&d t%e"e#o"e) e;,e&'e "ate i' muc% mo"e im,o"ta&t t%a& #o" a& eGuit #u&d$ A& #"o&t-e&d) e&t" load #o" a bo&d #u&d al'o "educe' t%e "etu"& to t%e i&7e'to" 'i.&i#ica&tl $ Loo- at bot% t%e'e eleme&t' o# co't'$ +o't' i&7ol7e /%at i' called Q ield 'ac"i#iceV$ Po"t#olio +%a"acte"i'tic': Mu't -&o/ t%e ,o"t#olio Gualit i& te"m' o# t%e +"edit Rati&.' - %o/ muc% ,e"ce&ta.e o# t%e ,o"t#olio i' %eld i& %i.%e't c"edit "ated i&'t"ume&t' a&d %o/ muc% i& lo/e" "ated o" &o&-i&7e'tme&t ."ade i&'t"ume&t'$ T%i' i' a mea'u"e o# ,o"t#olio "i'- - "i'- o# c"edit de#ault b t%e #u&dQ' bo""o/e"'$ A,a"t #"om "e7ie/i&. t%e c"edit "ati&.' o# t%e i&7e'tme&t ,o"t#olio o# a 'c%eme) a&ot%e" /a to "eco.&i'e t%e "i'o# de#ault "elated lo''e' i& a debt 'c%eme i' to loo- at t%e o7e"all +"edit Rati&. o# t%e Fu&d o" Sc%eme a''i.&ed b +"edit Rati&. A.e&cie'K a #e/ #u&d' i& I&dia %a7e bee& "ated a' a /%ole$ A7e"a.e Matu"it o# a debt ,o"t#olio /ill dete"mi&e /%et%e" t%e ,o"t#olio i' 'e&'iti7e to mo7eme&t' i& i&te"e't "ate'$ T%e lo&.e" t%e a7e"a.e du"atio& o# a ,o"t#olio) t%e ."eate" t%e 'e&'iti7it - mea&i&. i&c"ea'e i& i&te"e't "ate' /ill cau'e ,o"t#olio 7alue to decli&e a&d 7ice 7e"'a$ 6i.% cu""e&t ield o# a #u&d ma come at t%e co't o# %i.%e" "i'- o# ,"i&ci,al amou&t lo''$ T%u') lo&.-te"m #u&d' ca"" a %i.%e" "i'- o# ca,ital lo'' (o" .ai&*$ -@2-
Selecting a Money Ma#ket Fund:

a* Costs: I# e;,e&'e' a"e im,o"ta&t i& ca'e o# debt #u&d') t%e a"e c"ucial i& ca'e o# mo&e ma"-et #u&d') 'i&ce t%e .e&e"all o##e" lo/e" "etu"&' a&d e;,e&'e' ca& ta-e a/a a 'i.&i#ica&t ,a"t o# "etu"&'$ Loo- #o" #u&d' /it% lo/e" e;,e&'e "atio'$ b* Huality: Po"t#olio Gualit i' t%e ot%e" #acto" t%at a##ect' ield$ 6i.%e" ield /it% lo/e" "ated ,o"t#olio come' at %i.%e" "i'-$ Lo/e" Gualit ma %a7e 'ome 8u'ti#icatio& i& lo&.-te"m #u&d') but 'uc% "i'- i& ca'e o# '%o"t te"m mo&e ma"-et #u&d' i' u&acce,table$ c* Iields: 6i.%e" ieldi&. mo&e ma"-et #u&d' a"e &ot &ece''a"il o# lo/e" Gualit ) o" 7ice 7e"'a$ I& .e&e"al) u&li-e debt #u&d') MMMF' %a7e t%e lo/e't ,"i&ci,al) "i'- but %i.%e't i&come 7a"iabilit a' '%o"t-te"m i&te"e't "ate' #luctuate$ So 7i"tuall &o ca,ital .ai&' ,o''ibilit eit%e"$ Yield' o# ,o"t#olio' t%at a"e o# t%e 'ame Gualit a"e li-el to be &ea" ide&tical$ I& a& ca'e) loo- at a&d com,a"e Q&et ield'Q a#te" #u&d e;,e&'e' a&d load$
Selecting a )alanced Mutual Fund:

I& I&dia /e &o/ %a7e a& i&c"ea'i&. &umbe" o# Bala&ced Fu&d' a7ailable$ 6e&ce 'electi&. t%e "i.%t #u&d i' im,o"ta&t$ a* Po#tfolio )alance: P"o,o"tio& o# ,o"t#olio i& 'toc-') bo&d' a&d mo&e ma"-et 'ecu"itie' i' o&e #acto"$ Aei.%t .i7e& to cu""e&t i&come 7e"'u' total "etu"& i' a&ot%e" #acto"$ Bot% mu't be i& li&e /it% t%e i&7e'to"Q' ob8ecti7e'$ b* Debt Po#tfolio C%a#acte#: I& .e&e"al) bala&ced #u&d' a"e #o" t%e 'li.%tl co&'e"7ati7e i&7e'to"$ So it' bo&d ,o"t#olio ou.%t to be o# i&7e'tme&t ."ade Gualit ) /it% lo&. a7e"a.e matu"itie'$ c* d* Costs: Mo"e im,o"ta&t t%a& i& a& eGuit #u&d$ Fo" t%e i&come-o"ie&ted bala&ced #u&d) co't' a"e e7e& mo"e im,o"ta&t t%a& t%e eGuit -o"ie&ted t ,e$ $etu#ns: All t%at %a' bee& 'aid about %o/ to co""ectl com,ute "etu"&' o& ot%e" #u&d cate.o"ie') /%ile com,a"i&. a&d 'electi&. #"om di##e"e&t #u&d') i' al'o a,,licable to bala&ced #u&d'$
-@4-
Facts And Figu#es:1
-@?-
-21-
A7e"a.e AUM i& La't 34 Mo&t%'
-23-
)ibliog#a'%y
Aeb'ite': ///$ma%i&d"a#i&a&ce$com ///$.oo.le$com ///$am#ii&dia$com ///$&'ei&dia$com ///$'ebi$.o7$i& ///$-a"7 $m#'$com ///$cam'o&li&ei&dia$com
Ne/',a,e"': I&dia& E;,"e'' Time' o# I&dia 6i&du'ta& Time' Eco&omic Time'
Ma.a:i&e': Outloo- Mo&e Bu'i&e'' Ao"ld
-22-

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A REPORT ON

ANALYSIS OF MUTUAL FUNDS

Analysis Of Mutual Funds And Data Analysis

ANALYSIS OF MUTUAL FUNDS

Submitted b : Ma&a'/i !a&d%i 0 12 BS 2314

Analysis Of Mutual Funds And Data Analysis

Analysis Of Mutual Funds And Data Analysis

Analysis Of Mutual Funds And Data Analysis

Analysis Of Mutual Funds And Data Analysis

-ision. St#ategy and Positioning

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Analysis Of Mutual Funds And Data Analysis

Analysis Of Mutual Funds And Data Analysis

Key Events In Business History

Analysis Of Mutual Funds And Data Analysis

I&7e'tme&t ,"oduct' "i'- i& Mutual #u&d i&7e'tme&t etc$

Analysis Of Mutual Funds And Data Analysis

ANAYLASIS OF MUTUAL FUND INDUSTRY

Analysis Of Mutual Funds And Data Analysis

Analysis Of Mutual Funds And Data Analysis

Analysis Of Mutual Funds And Data Analysis

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Analysis Of Mutual Funds And Data Analysis

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Analysis Of Mutual Funds And Data Analysis

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Analysis Of Mutual Funds And Data Analysis

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Analysis Of Mutual Funds And Data Analysis

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Analysis Of Mutual Funds And Data Analysis

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Sc%emes acco#ding to in"estment ob/ecti"e:

Analysis Of Mutual Funds And Data Analysis

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b9 I&comeC Debt o"ie&ted 'c%eme:

Analysis Of Mutual Funds And Data Analysis

d9 Mo&e Ma"-et o" LiGuid Fu&d:

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Analysis Of Mutual Funds And Data Analysis

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Analysis Of Mutual Funds And Data Analysis

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Analysis Of Mutual Funds And Data Analysis

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Analysis Of Mutual Funds And Data Analysis

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Analysis Of Mutual Funds And Data Analysis

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Analysis Of Mutual Funds And Data Analysis

<9 Non $esidents &ncluding:

(ow To Make Money &n Mutual Funds*