Basic Sales Training PRUDENT CAS LTD. - Money through wisdom -

It is a pool of money, collected from investors, and is invested according to certain investment objectives The ownership of the fund is thus joint or mutual, the fund belongs to all investors. A mutual funds business is to invest the funds thus collected, according to the the wishes of the investors who created the pool MUTUAL FUND

Working of Mutual Fund

Professional Management Portfolio Diversification Reduction in Risk Choice of Products Flexibility and convenience Liquidity Transparency Low Transaction Cost MFs also offer great tax benefits: 1.No long term capital gains on equity funds 2.Tax free dividends & 3.Eligibility u/s 80C Great product for investment, wealth protection, creation, preservation … MUTUAL FUNDS – A GREAT PRODUCT

Classification of types of Fund

In an open ended fund, investors can buy and sell units of the fund, at NAV related prices, at any time, directly from the fund. Corpus of open-ended scheme changes everyday. Investors receive account statements of their holdings. The number of outstanding units goes up and down. No fix maturity. Open Ended Funds

A closed -end fund is open for sale to investors for a specified period ( NFO ), after which further sales are closed. Any further transactions happen in the secondary market (stock exchange) where closed-end funds are listed. The price at which the units are sold or redeemed depends on the market prices, which are fundamentally linked to the NAV. The number of units of closed ended funds remains unchanged. Fix Maturity. Close Ended Funds

These schemes combine the features of open-ended and closed-ended schemes. They may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV based prices. No Fix Maturity Interval Funds

Equity Debt Money Market Equity Funds Index Funds Sector Funds Fixed Income Funds GILT Funds Money Market Mutual Funds Balanced Funds Liquid Funds Type of Funds – By Investment Objective

The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. Growth / Equity Oriented Schemes Index Funds Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc. These schemes invest in the securities in the same weightage comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index.

Sector specific Funds These are schemes whose objective is to invest only in the equity of those companies existing in a specific sector. e.g. IT, Banking, Pharma stocks etc. Diversified Equity Funds These are schemes which do not focus on any particular sector. Since sectors are diversified hence risk is also reduced.

The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However, opportunities of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. Income / Debt Oriented Scheme

These debt funds invest only in instruments with maturities less than a year. Lowest in the order of risk level. The investment portfolio is very liquid and enables investors to hold their investments for very short horizons of a day or more. It invests only in securities that are issued by the Government and therefore do not carry any credit risk Government papers are called as dated securities also. It invests in medium to long-term government papers. Ideal for institutional investors who have to invest in Govt. Securities Enables retail Participation Liquid / Money Market Funds Gilt Fund

The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities. They generally invest 60% in equity and 40% in debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds. Balance Funds

Open or closed ended. Minimum investment of 90% in equity markets at all times So ELSS investment automatically leads to investment in equity shares. 3 year lock in period. Tax Benefit u/s 80C upto Rs.1 L allowed Dividends are tax free. Benefit of Long term Capital gain taxation. ELSS ( Equity Linked Saving Scheme )

FTPs are closed ended in nature. AMC issues a fixed number of units for each series only once, and closes the issue after an initial offering period. Fixed Term plan are usually for shorter term – less than a year. FTP series are likely to be an Income scheme. Good alternate of Bank deposits/ corporate deposits. Fixed Term Plan

A scheme that invests primarily in other schemes of the same mutual fund or other mutual funds is known as a FoF scheme. A FoF scheme enables the investors to achieve greater diversification through one scheme. It spreads risks across a greater universe. (considered to be debt fund as far as the tax implications are concerned) Fund of Fund Scheme ( FOF )

Equity >65% Dividends DDTShort TermsLong TermsInvestors Capital Gains Tax FreeNILTax Free 15% Within 12 mAfter 12 m Short TermsLong Terms Within 12 mAfter 12 m Tax provision for Equity Mutual Fund

Debt Mutual Fund DividendCapital Gain InvestorDDT Short termLong term Within 12 mAfter 12 m Two optionsAs per slab 10% Paid by the Fund 20% after indexation Tax free Tax provision for Debt Mutual Funds

Risk Income Funds Money Market Investment horizon Days1 year 3 years Floating Rate Funds Short Term Plans Returns >> Gilt Funds MIPs Balanced Funds Diversified Equity Funds Sectoral Funds Risk Profile …..

Some Basic concept of equities & selling equity through Mutual Funds ?

Every one wants to time the market………. FearHope The Cycle of Fear, Greed & Hope Greed It is the time that matters & not the timing………….. Investors Psyche

Simply put …

Equity Investments are made on Tips & Flavors Equity Investments are tracked part time & not full time Skill sets required to understand a company is lacking Equity Investments are made for short term Equity Investments are not adequately diversified People look at acquisition price & not future value Reasons of Failure

In past 28 years BSE Sensex has given about 20% returns Past Performance (BSE Sensex) YearSensexInvestment Rs ,00, ,70,00,000 This is in spite of … Two wars At least three major financial scandals Assassination of 2 prime ministers At least 3 recessionary periods 10 different governments and An unfair share of natural disasters

18.57% 0 / 13 Equities: Not Risky in Long Run

Qualities needed for a successful Investment QualitiesDescription Do you have ? Does a mutual fund have it? Investment processA systematic method of selection of the scripts, with the synchronization of objective. ??? Yes InfrastructureTechnology, information at hand, statistical tools, research team, time etc. ??? Yes ExperienceThe experience of making investment decisions on a regular basis & experience of standing all the business/economy cycles. ??? Yes

QualitiesDescription Do you have ? Does a mutual fund have it? Knowledge & qualification Most Fund managers are professionally qualified. Moreover, their knowledge is assisted by a lot many support which they get in the form of their research team, study etc. ???Yes Constant monitoringReviewing & analyzing your investment at every moment of time. ???Yes Qualities needed for a successful investment contd …

QualitiesDescription Do you have ? Does a mutual fund have it? Full Time Involvement Managing your investments is the full-time job of the fund managers. But for you it is the management of your savings generated from other full-time job. ??Yes BiasFavoritisms for a particular group/ company/sector etc. Temptations to wait & watch for market to further go down & then enter the market – missed opportunities Temptations to wait & watch for markets to further move up & then exit – missed opportunities ?? No Qualities needed for a successful investment..contd

Risk Return Spectrum Savings Bank/ FD Liquid Funds PPF, NSC, KVP, PO Deposits, RBI Bonds Debt Funds Gold Real Estate Equity Risk Return potential Low High Low High

Most qualities for successful investment making are present with a mutual fund. The qualities which an investment team of a mutual fund possess are much more reliable than the next door unqualified broker. It is much easier to analyze and find out a good mutual fund rather than finding a good stock. The parameters to judge a good mutual fund are the past proven facts rather than on some probable uncertain future facts. It is much easier to track a mutual fund investment rather than an investment in stock. Why Equities through Mutual Fund ??

The risk control mechanism on your investment are actively taken care of by the fund managers. You can be free of all tensions & worry after handling your money to fund managers. Like stock, you need not track it very wildly. You save a lot of time & energy to focus on your competence business, thereby earn & invest more & more. You can easily satisfy your long-term objective of wealth maximization. All above, mutual funds are the best representations of the minority shareholders. Why Equities through Mutual Fund ??

Smart Investors Preference (SIP)

Systematic investment plan is a disciplined way of investing, where we can invest fixed amounts at regular intervals through a mutual fund. Its like RD A/C in Post Office or Banks. SIP helps to buy more when market falls. SIP helps to buy less when market rise. Thus Market fluctuation get averaged. What is SIP ….. ??

No need to time the market – Rupee cost averaging Power of Compounding Disciplined investment habit Auto debit facility Low investments Commensurate Returns – Easy to create wealth Benefit of SIP

Month Amount you invest NAV No. of units TOTAL Rs.1000 Rs.4000 Rs.10 Rs. 5 Rs. 2 Rs. 5 Rs Avg Pur Cost = 4000/1000 = Rs 4 You invest Rs 4000 and get Rs even in fluctuating market. Rupee Cost Averaging ….

An investment of Rs.1,000/- every month for 10 years at an average return of 18% yields Rs.3,36,528/- Power of Compounding

After 15 – 20 Years…..

On Retirement …..

Better still, an investment of Rs.1,000/- every month for 30 years at an average return of 18% yields Rs.1,16,27,862/- Believe it or not …..

Power of Compounding Growth of Rs. 100 Equity Best Bet of Investments in Long Run Difference is quiet significant in long run, and such return is possible only by investing in equity, equity investment can largely beat inflation

Let Us Begin With A Little Quiz…..

25 Years What is the Average Age when one starts Earning?

What is the Average Retirement Age? 60 Years

Rs.15,000/- p.m. What is an Average Income of an Middle-Class House-hold?

Rs.5,000/- p.m. How much can a person save on a regular basis?

If a person can save Rs.5,000/- per month What will be his wealth when he retires? Assuming: He increases his investments by 5% every year Invests in an Asset class that gives returns of 20%

At Age 60 his wealth would have been Rs.27 Crores

Creating Wealth is Easy We can all be Wealthy THE TRUTH

Start Saving Early The longer you save, the more you make Save in the Right Asset Class This will dictate how much wealth you create … Save Regularly Even a small amount saved regularly, is good How can you create wealth?

4.90 Crores* 27 Crores* 40 years 25 years60 years RamShyam Savings Starting Age2540 Savings - Monthly SIPRs.5,000/-Rs.15,000/- Saving Years till age 6035 years20 years Total Amount Saved (appx.) Rs.57 lacsRs.62 lacs Give time to your investments rather than timing Assumptions: (a) Savings grows at 5% annually (b) Returns assumed at 20% CAGR Give time to your investments rather than timing Start Early

Sensex Company Deposits Bank Deposits Inflation Gold Equity market (represented by BSE Sensex) has outperformed all other investment avenues Selecting Right Asset Class

Twin Benefits of Investing Regularly Disciplined Investing through Systematic Investment Plans (SIPs) is the ideal way to reduce risk Rupee Cost Averaging Average Purchase cost will be less Automatic Timing At higher prices – less units At lower prices – more units Rising Market Falling Market MarketUnits PurchasedMarketUnits Purchased Save Regularly

It is the small drops that make an ocean!! Relieves you of the last minute pressure Slow and steady wins the race –E.g. Split your Sec 80C investments into smaller amounts and invest every month Reduces the risk of investing at the wrong time –Difficult to predict the market and know when is the right time We earn regularly; We spend regularly Shouldnt we also invest regularly? Save Regularly

A small amount invested regularly can grow to substantial lumpsum …….It all adds up! Rs.21.7 lakhs 30 Rs.1000 invested every month for 30 Save Regularly

One time investment of Rs.1 lakh invested for 30 6% % lakhs66.2 lakhs Earn more…it can make a big difference Earn More…..

Power of Compounding - QUIZ Rs. 10,000 invested every month for a period of 30 years At 8% - At 15% - At 20% crores 7.0 crores 23 crores Postal Recurring ?????? Earn More…..

A Snapshot of poor performing schemes

A Snapshot of better performing schemes

Create Wealth Start Early Invest Regularly Make your money work hard for you Earn More Formula for Creating Wealth

We do not need to be wealthy to be an investor …But we can be wealthy if we are investors The Right way to create wealth … Buying potential big winning stocks Successfully timing the markets Following Expert Advisors recommendations Saving a lot of money Wealth can be successfully created if we just follow the three basic principles... Starting early and saving for long Investing in the right asset class Investing Regularly – big or small Wisdom X X X X

We all have goals in life like… Car Child Education Using the Wisdom Child Marriage Dream House

Using the Wisdom We can direct our savings in such a manner that we achieve our goals, the way we wish DISCIPLINED SAVINGS + SUFFICIENT TIME + RIGHT ASSET CLASS = GOAL ACHIEVEMENT

Start an SIP today and Sit back and Relax