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UTI MUTUAL FUND
Welcome
Delegates to Program
“MUTUAL FUND – CONCEPTS AND BENEFITS
Presented by Sh Rakesh Trikha, VP,
Regional sales Head , UTI Mutual Fund , New Delhi
An introduction to
Mutual Funds
What are mutual funds?
•
•
•
•
A pool of money.
Investors having a common interest.
In accordance with the stated objective.
Fund manager invests money on
investors behalf.
• Example:- Equity fund invests in
equities, Debts funds invests in
bonds, debentures, gilts etc. and Hybrid
fund invest in both
Graphical Representation
History Of Mutual Funds
Indian MF Industry has gone through 3 phases :-
• Phase 1- 1964 – 1987 (UTI was the only
player)
• Phase 2- 1987 – 1993 (Entry of Public sector
Banks backed Mutual Funds)
• Phase 3- 1993 onwards. ( Mutual funds from
Pvt. Sector start operations and regulatory
authority SEBI comes onto being)
Why invest in a mutual fund?..(1)
• Professional Management
 experience and resources to thoroughly analyze
the
 economy/markets to spot good investment
opportunities
Why invest in a mutual fund?..(2)
• Diversification:
 Reduces the risk to which you would've been
exposed by
 investing in a single stock/bond
 Invests in a broad cross section of industries
or companies –
 negative performance of one security will
not have as much
 of an impact on the fund
Why invest in a mutual fund?..(3)
• Liquidity & Convenience:
 You will be able to get your money back within a
short period as compared to other securities
 Very little paperwork
 Helps avoid problems such as bad deliveries,
delayed
 payments and unnecessary follow up with
brokers and
 companies
Why invest in a mutual fund?..(4)
• Tax Efficiency:
 Some mutual fund schemes offer tax benefits under
Section 80-C
 TAX FREE Dividends/LONG TERM CAPITAL GAIN( > 12
month) under Equity schemes
 Only 10 % Long term capital gain under Debt Schemes
v/s High taxation under FD/Post office schemes
 Mutual funds offer favourable post-tax returns
Broad Classification
Open Ended
Constitution
Close Ended
Interval
Types of Mutual Funds
Equity Funds
Investment
Objective
Debt Funds
Hybrid Funds
Types of Mutual Funds
By
Constitution
Open Ended Schemes
• Open-ended schemes do not have a
fixed maturity period / lock-in-period.
• Investors can buy or sell units at current
NAV on any business day.
Close Ended Schemes
• Close-ended schemes have fixed maturity periods.
• Investors can buy into these funds during the
period when these funds are open in the initial
issue.
• For Example :- UTI – Lifestyle fund, UTI wealth
Builder Fund, UTI – Capital Protection Fund
Interval Schemes
• 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.
• For example: Tax saving schemes where they
are closed ended for 3 years usually and then
become open-ended.
Types of Mutual Funds
By
Investment Objective
Equity Funds
• They invest the funds in stocks and
shares of Companies.
• Investors can diversify their risks of
investing in the markets in a typical
equity oriented Mutual fund.
Debt Funds
• These schemes invest in debt
instruments such as corporate bonds,
debentures and government securities.
• The prices of these schemes tend to be
more stable as compared to Equity
schemes.
• These
schemes
are
ideal
for
conservative investors or those not in a
position to take higher Equity risks, such
as retired individuals.
Hybrid Funds
• Commonly known as Balanced Funds
• They invest in both equities as well as debt.
• The debt component in the Balanced
schemes seek to regular income and the
equity component aims to generate capital
appreciation.
• Ideal for investors who would like to take
slight exposure to equity but still want an
element of safety in their portfolio.
• For Example :- UTI Balance Fund, UTI Mahila
Unit Scheme , UTI Children Career Plan
Further classification
Equity Funds
Hybrid Funds
Debt Funds
Diversified
Balanced
Liquid
Large-cap
Monthly
Income Plan
Short-term
Mid &
Small-cap
Income
Sectoral
Gilt
Fixed
Maturity
Plan
Index
Tax saving
Equity Funds – Diversified
• The investment objectives does not restrict
these funds from investing only in specific
industries or sectors.
• These funds have a diversified portfolio of
companies spread across a vast spectrum of
industries.
• These schemes are exposed to equity price
risks.
• For Example :- Leadership Fund ,
Equity Fund- Sectoral
• These schemes restrict their investing
to one or more pre-defined sectors.
• These schemes are inherently more
risky than general-purpose schemes.
• They are best suited for informed
investors who wish to take a view and
risk on the concerned sector.
• For Example :- UTI – Software fund,
Services Fund, Pharma and Healthcare,
Auto etc.
Equity Funds - Index based
• An Index serves as a relevant benchmark to evaluate
the performance of Mutual Funds.
• Investors are comfortable investing in a fund that they
believe is a good representative of the entire market.
• Index funds move in line with the Index in the falling
market and provide the much-needed risk mitigation.
• Pure Index fund :
• UTI MIF (sensex)
• UTI NIF ( Nifty)
• Index based fund : UTI Index select Equity fund
Equity Funds - Tax Saving
• Also known as ELSS ( equity linked saving
schemes ).
• Gives a tax benefit to the investors under Sec
80C
• Units purchased cannot be transacted until
completion of 3 years from the date of allotment
of the respective Units.
• An example of ELSS scheme is the UTI Equity
Tax Saving Plan (ETSP).
FUND POSITIONING
SECTOR
FUND
Return
SECTOR
ROTATION FUND
Thematic fund
DIVERSIFIED
FUND
INDEX FUND
Risk
Leadership fund can give higher and sustainable return
Hybrid Funds
• Balanced Funds – They invest in a
combination portfolio where usually
60% is in Equity and 40% in debt.
• Monthly Income Plan – They have a
higher component in debt even up to
80% and 20% in equity. They are a safe
investment with a kicker from equity for
returns.
• There can be multiple combinations
depending upon scheme objectives
Debt Funds - Money Market
Schemes
• These schemes invest in short term instruments
such as commercial paper ("CP"), certificates of
deposit ("CD"), treasury bills ("T-Bill") and
overnight money ("Call").
• The schemes are the least volatile of all the
types of schemes because of their investments
in money market instruments with short-term
maturities.
Debt Funds - Liquid Funds
• Liquid Schemes invest in call money market
and short maturity papers.
• They are highly liquid and one can make
investments in them even for a day.
• There are no Entry and Exit loads in liquid
funds.
• For Example :- UTI – Liquid Cash Plan.
Debt Funds - Short-term Bond
Funds
• They are good for investors who want to
make investments for a period of 3-6
months.
• They usually deliver returns which are
25-50 basis points more than the call
money market rates.
• They invest in Corporate bonds and
Commercial Paper
• Example : UTI Liquid Plus Scheme
Debt Funds - Income Funds
• These schemes invest in money markets, bonds
and debentures of corporate with medium and
long-term maturities.
• These are suitable for conservative investors
who have medium to long-term investment
horizon and are looking for regular income
through dividend or steady capital appreciation.
• They usually deliver returns which are more
than 100 – 150 basis points more than the call
money market
• Example : UTI – MIS Advantage Plan
Debt Funds - Gilt Funds
• These schemes primarily invest in
Government securities.
• Hence the investor usually does not
have to worry about credit risk since
Government Debt is generally credit risk
free.
• For Example :- UTI Gsec Fund
How do I make money from a
mutual fund?.....
• Capital appreciation:
As the value of securities in the fund increases, the
fund's unit price will also increase. You can make
a profit by selling the units at a price higher than
at which you bought
• Income Distribution:
The fund passes on the profits it has earned in the
form of dividends
Options to invest
GROWTH OPTION
• Best suitable for investors looking for long
term investments.
• The amount invested goes on accumulating.
• On redemption one would receive the
market value of investment.
• It is also called as money accumulator.
Options to invest
DIVIDEND OPTION
• Dividend Payout :- Suitable for
investors who want regular income. The
dividend amount comes in the hand of
the investors
• Dividend Reinvestment :- The investor
gets units equivalent to the amount of
dividend declared which gets reinvested into the scheme.
Modes Of Investment
• Lump-sum investment – Making a one time investment
in a scheme
• Systematic Investment Plan – Investing a small sum of
money regularly
• Systematic Transfer Plan – making a systematic transfer
of profits from 1 fund to another
• Systematic Withdrawal Plan – withdrawal of funds from
a scheme on a regular basis to gain regular income.
NAV
• The Term NAV means Net Asset Value.
• Net Asset Value is the market value of the
securities held by the scheme.
The market value of securities of a scheme
NAV
= ______________________________________________
Total number of units of the scheme on any particular
date.
• For example, if the market value of a Mutual
Fund scheme is Rs.200 lakhs and it has
issued 10 lakh units of Rs.10 each, to the
investors, then the NAV per unit of the fund is
Rs.20.
Loads or Charges on MF
• Entry Load :- Generally all mutual funds
especially equity funds have an entry load
on its purchase.
• Entry load is calculated on the current NAV
of the fund.
• Generally a fund house charges an entry
load of 2% to 2.25%.
Contd..
• Exit Load :- An Exit load is charged by
the fund house when one wishes to exit
or redeem his units.
• Exit load is also calculated on the
current NAV.
• Generally a fund house charges 1% exit
load on all equity schemes if exited
before 6 months.
Tax Aspects
In case of dividend income
• In the hands of the investors, dividend is taxfree.
• Dividend distribution tax is at the rate of
12.81% payable by the AMC only incase of
Debt funds.
Capital Gain Tax
• Capital Gain = selling price – purchase
price.
• Capital gains are of two types:
Short Term Capital Gain
Long Term Capital Gain
Tax Rules for Mutual Fund
Investors
EQUITY SCHEMES (Equity investment < 65% of fund
size)*
SHORT TERM
CAPITAL GAINS
LONG TERM
CAPITAL GAINS
TDS
Resident
Individual/HUF
10%
NIL
NIL
Partnership
Firms
10%
NIL
NIL
NRIs
10%
NIL
STCG 11.33% (10%+10%
SC+ 3%ES)
* UTI Infrastructure Fund, Service Sector, DYF, Leader Ship Fund etc.
Tax Rules for Mutual Fund
Investors
NON EQUITY SCHEMES (Equity investment less than
equal to 65% of fund size)
Resident
Individual/HUF
Partnership Firms
NRIs
SHORT TERM
CAPITAL
GAINS
LONG TERM
CAPITAL GAINS
TDS
Marginal rate
10%(20% WITH
INDEXATION)
NIL
30%
10%(20% WITH
INDEXATION)
NIL
Marginal rate
10%(20% WITH
INDEXATION)
STCG-30%,
LTCG-20% (after
indexation)
*FMP, MIPs, Liquid Funds etc.
Tax Rules for Mutual Fund
Investors
DIVIDEND DISTRIBUTION TAX
DIVIDEND
INCOME
ALL SCHEMES
EQUITY
SCHEMES
LIQUID
SCHEMES
NON EQUITY
SCHEMES
Resident
Individual/HUF
TAX FREE
NIL
28.325%(25%+
10SC+3%ES)
14.1625(12.5%+1
0%SC+3%ES)
Partnership
Firms
TAX FREE
NIL
28.325%(25%+
10SC+3%ES)
22.66%(20%+10
%SC+3%ES)
NRIs
TAX FREE
NIL
28.325%(25%+
10SC+3%ES)
14.1625(12.5%+1
0%SC+3%ES)
UTI Liquid and Liquid Plus
UTI Liquid FundCash Plan
UTI Liquid Plus
Fund
Entry Load
NIL
NIL
Exit Load
NIL
0.15% if redeemed
between 0-7 days
DDT
28.325%
14.1625%
WEALTH TAX &GIFT TAX
FOR MF UNITS
WEALTH TAX
MF units are exempt
GIFT TAX
MF units are exempt
INCOME TAX
PROVISIONS ON
CLUBBING FOR
GIFT OF UNITS
Dividend Income
As dividend is tax free in hands of
unit holder, hence no tax applicable
on either Donee or Donor
ST/LT Capital
Gain Loss
If the transferee or donee is:
“spouse Son’s wife or minor son :
gain/loss clubbed with that of the
donor of units “
Other independent donee : gain/loss
treated as donee’s gain/loss and not
clubbed with that of donor
Investment option – Tax on
Income
Asset
Type of income
Tax
Listed equity shares
Dividend
Exempt
Unlisted equity shares
Dividend
Exempt
Equity-oriented mutual
funds
Income distribution
Exempt
Non Equity mutual funds Income distribution
Exempt
Derivatives (futures)
No income
NA
Gold/precious metals
No income
NA
Paintings
No income
NA
Real estate
Rent
Taxable
Investment option – Tax on
Capital Gain
Asset
Period of holding
required to make
asset long-term
Tax on profit,
if asset is
long-term
Tax on profit,
if asset is
short-term
Listed equity shares
12 months
NIL
10%
Unlisted equity
shares
12 months
20%
Normal rate
Equity-oriented
mutual funds
12 months
NIL
10%
Non equity mutual
funds
12 months
20%
Normal rate
Derivatives (futures)
NA
NIL
NA
Gold/precious
metals
36 months
20%
Normal rate
Paintings
36 months
20%
Normal rate
Real estate
36 months
20%
Normal rate
Risks Involved in Mutual Funds
• Market Risk
Depends on the volatility of market.
• Inflation Risk
Inflation risk occurs when prices rise
faster than returns.
Risks Involved in Mutual Funds
• Interest Rate Risk
This generally applies to debt funds.An
increase or decrease in interest rate
affects the bond prices.
• Investment Risks
The NAV of the schemes are linked to
the equity performance of such
companies and may be more volatile
than a more diversified portfolio of
Equities.
For Further Queries Reach
Your Financial Advisor
or
UTI MF Team Dehradun at
S.P.S Oberai , Chief Manager 98975 40022,
Relationship Manager(s) 9897000972, 982, 992
website: utimf.com
Toll Free No 1800 22 1230
THANK YOU
Disclaimer
Risk Factors : - All investments in Mutual Funds and securities are
subject to market risk and the NAV of the Funds may go up or down
depending on the factors & forces affecting the securities market. Past
performance of the Sponsor/Mutual Fund/ Scheme(s)/AMC is not
necessarily indicative of the future results. UTI CCP (Balanced Plan) is
just the name of the scheme and not in any manner indicate the quality
of the scheme, its future prospects or returns. The scheme is subjected
to the risks relating to interest rate ,liquidity, securities lending,
investment in overseas market, trading in equity and debt derivatives.
There may be instances where no income distribution could be made.
Please read offer document and consult your financial advisor before
investing