Mutual Funds Course Introduction: Basics of Mutual Fund Industry

In this article, we will provide the brief outline of any course on Mutual Funds and Mutual Fund Industry Practices which are followed. This content will enable a person to udnerstand the Basics of Mutual Fund Industry, The valuations of Mutual Funds, the mathematics of mutual Funds calculations, Mutual Fund Markets, Buying/Selling/ Redemption of Mutual Fund Units, the regulatory requirements of MF Industry, Taxation issues of MF, Various Kinds of Mutual Funds, etc..
The Concepts of Mutual Fund Market: We begin by explaining the overall concept of the Mutual Fund, how they are created and brought to the Financial markets.

Capitalization concept in Mutual Fund: In this module, the capitalization of MF is discussed

Net Asset Value (NAV) calculation of Mutual Fund Units : Now the fun begins - how to price a mutual fund and with what parameters

Various Types of Mutual Funds : Here, the different kinds of mutual funds are introduced.

Mutual Fund Buying or Purchases : Trading activities may not be possible in all mutual funds, as some of them are OTC products which are bought and sold only at the End of the day pricing. While some Mutual funds like ETF's are exchange traded and their pricing changes as like any other stock price movement.

Types of Yields available in Mutual Fund : Various parameters which indicate the yield calculations of Mutual funds.

Mutual Fund Redemption : Redemption is the process of an investor selling back his MF units back to the Mutual Fund House.

Marketing & Distribution of Mutual Funds : The scene from the other side - how the mutual fund is brought to the market and how it is sold and marketed

Use and Legal Requirement of the Mutual Fund Prospectus : Regulatory and compliance

NASD Regulations for MF industry:

Federal Taxes for Mutual Fund: Taxation of mutual funds is done differently, both for the issuers as well as the investors

Trading of Mutual Funds on Margin : Can you trade in Mutual funds, if yes, then how to leverage the limited capital for trading in MF's.

Shorting MF Units: Mechanics of Short Sales : Short sale of MF units, those who master this know how to make profits

Real Estate Investment Trust : A special kind of fund trust, specific to real estate and property investment.

Fixed and Variable Annuities : Annuity concepts

Assumed Investment Return:

Buying Mutual Fund from ICICIDirect? Charges you pay after 1 August after SEBI orders

In our recent article about Buying Mutual Fund? What Charges you pay after 1 August after SEBI orders, we had given you the details and an example of how the mutual fund charges be levied to an investor after the SEBI orders for Eliminating the entry loads for Mutual Funds. We had taken the example of ICICIDirect Mutual fund charges. Now, it appears that ICICIDirect has gone for a revision of charges it will take for investments of less than 8 Lakh Rupees.

You still dont have to pay any charges if your lumpsump investment or cumulative investment with ICICIDirect in Mutual Funds has been more than 8 Lakh Rs. The "cumulative value" will be taken as per Value at NAV of your entire MF holdings, at the time of order placement, as seen on your MF Unit Holdings page. Transaction charges will be applied as per the new fee structure, accordingly.

However, if your investment with ICICIDirect in Mutual Funds is less than 8 lakh Rs., then the following charges will apply:

For SIPs - Rs. 30/- or 1.5% whichever is lower
For Lumpsum investments - Rs. 100/-

The benefit will come to those who may want to invest in smaller amounts of SIP. So for example, if you want to invest Rs. 500 per month, then you will only need to pay 500 * 1.5% = 7.5 Rs. per transasction or Rs. 90 for the entire year 12 months) SIP investment.

Will this new scheme really help?
It actually depends upon you and your broker and his charges.
If your broker charges high amount, then you may be a looser on that. But if you can find a good broker who charges low rates, then you can save a lot of money. So you will have some choice. However, you will now have to face and evaluate various conditions set forth by the broker. For eg. For Zero charges, ICICIDirect requires a minimum of 8 Lakh Rs. investment. That is a big amount for any investor.

It is good because now you will know what charges you are paying for investing in Mutual Funds. It will give respite to investors in Mutual Funds who were not keeping a close eye on the Mutual Fund Charges, which can build up to a significant amount in the name of distribution charges, marketing charges, fund management charges, entry load, etc. Now, the cheque that you write for the Mutual Fund Investment will ensure that all your money value written on the check actually goes into your investment

Buying Mutual Fund? What Charges you pay after 1 August after SEBI orders

After a long time, a good news has come to the investors in the Indian Mutual Funds Market. SEBI or Securities and Exchange Board of India has directed all Mutual Fund houses and brokerages not to deduct marketing and distribution charges from the investment made by subscribers.


What has changed after SEBI's instructions?
Let's say you wanted to invest 10,000 in a Mutual Fund of your choice and it had an entry load of 2.25%. That would mean that an amount of 225 would be deducted from your 10,000 and 9775 only would be your actual investment.
However, after the recent change introduced by SEBI, your entire 10,000 will be invested in the Mutual Fund.

Does this mean I dont have to pay any charges for investing through my broker or agent or Mutual Fund Distributor?
No. That is not the case. Many people are getting the impression that they may not be required to pay anything after the SEBI's directive. However, what this order means is that if you write a cheque for 10,000, then all your 10000 will be going to your investment in Mutual Funds. You will still HAVE TO PAY Brokerage and distribution cost, but that might vary depending upon your broker.
This charge will be reflected and charged seperately to you.
The order for SEBI is not to eliminate the charges, but to involve transperancy in the investment process. Please bear in mind that you will still have to pay the charges for making the investments in mutual funds, though this will be charged seperately by your broker.

Is there an example for this?
Yes. Say ICICI Direct has come out with its variable brokerage plan after the order from SEBI. As per the plan, if you have a total cumulative holding in Mutual Funds with ICICI Direct at 8 Lakh or more, then you dont need to pay anything either for SIP investments or lumpsum investments.

However, if your Mutual Fund holdings are less than 8 Lakhs, than you will have to pay per transaction:

For SIP investments - Rs. 30 per transaction

For Lumpsum Investment - Rs. 100 per transaction

Will this new scheme really help?
It actually depends upon you and your broker and his charges.
If your broker charges high amount, then you may be a looser on that. But if you can find a good broker who charges low rates, then you can save a lot of money. So you will have some choice. However, you will now have to face and evaluate various conditions set forth by the broker. For eg. For Zero charges, ICICIDirect requires a minimum of 8 Lakh Rs. investment. That is a big amount for any investor.

It is good because now you will know what charges you are paying for investing in Mutual Funds. It will give respite to investors in Mutual Funds who were not keeping a close eye on the Mutual Fund Charges, which can build up to a significant amount in the name of distribution charges, marketing charges, fund management charges, entry load, etc. Now, the cheque that you write for the Mutual Fund Investment will ensure that all your money value written on the check actually goes into your investment