Although being absolutely simplistic in construct, the investment through mutual funds forms a core part of a large number of client portfolios. It refers to a collective pool of money contributed by several investors and managed by a professional fund manager.
The advantages can be broadly grouped as below:
Mutual funds in India are established in the form of a Trust under Indian Trust Act , 1982 in accordance with SEBI ( mutual funds) regulations , 1996 . India’s first mf was established in 1963 Unit trust of India at the initiative of Govt of India & RBI with a view to encourage savings & investment and participation in the income, profits and gains accruing to the corporation from the acquisition , holding , management and disposal of securities . The history can be better understood into 5 important stages
First phase – formation of UTI IN 1963 . In 1978 it was delinked from RBI and IDBI took over took over control in place of RBI . Unit scheme was the first scheme launched by UTI which had approx. 6700 cr of AUM by end of 1988.
In 1987 , public sector mfs were set up by Public sector banks , LIC & GIC . SBI was the first in this category followed by Canbank , PNB , Indian bank , Bank of India . BY 1993 , AUM was 47000 cr.
SEBI was established 1992 to protect the interest, to promote , regulate securities market . The first private sector mf was Kothari pioneer ( now merged with franklin mf) in 1993 . A no of foreign sponsors set up mf in India . By the end of Jan 2003 , there were 33 MFs with AUM of 121805 cr out of which UTI had 44541 cr.
In Feb 2003 , UTI act was repealed and UTI was bifurcated into 2 separate entities – SUUTI & UTI mf . The most remarkable act after global meltdown in 2009 was abolition of entry load by SEBI . The industry initially struggled to recover and remodel itself for over 2 years to maintain its economic viability . The AUM growth was sluggish between 2010-2013.
SEBI introduced progressive measures in Sept 2012 to re- energize the industry & increase penetration . Since May 2014 , the industry witnessed steady flows and consequently the milestone of 10 lakh cr was crossed for the first time on 31 May 2014 and 20 lakh crores in 2017 followed by 30 lakh cr in Nov 2020. Currently it is above 67 lakh cr as on Sept end 2024. It grew 7 fold in a span of 10 years . The total no of SIP accounts stands at 9.87 lakh cr .
Trailing and rolling returns are two metrics used to calculate the returns generated. A keen understanding of the two helps one compare returns Trailing also known as point to point return calculates returns between two set points in time . this is used to gain insight into historical performance of a fund but do not provide complete picture of fund’s consistency Rolling returns refer to average annualized return over a specified period . Can be used to calculate returns for a day to an year . More comprehensive view over an extended period of time . it also evaluates consistency of performance
Risk is an inherent part of investment . The market is likely to fluctuate over time and is impacted by multitude of factors . Aliging one’s mf investments with financial goals , following prudent risk management strategies and educating one self goes a long way in riding the volatility and achieving steadfast returns in the long run
Mutual funds are not assured return products and involves investment risks such as price risk , trading volumes , settlement risk , liquidity risk , default risk and other market level and company , sector specific events as far as equity is concerned
Similarly debt securities are subject to market risk , credit risk , price risk , interest rate risk , market perception of various issuers and general market liquidity , reinvestment risk .
The fees and expenses charged by mutual funds to manage a scheme are regulated and are subject to the limits specified by SEBI They provide certain distinct advantages over investing in individual securities . They offer multiple choice s for investment across equity , corporate bonds, govt securities , money mkt instruments providing an excellent avenue for retail investors to participate and benefit from the uptrends in capital markets One can invest in a variety of securities for a relatively low cost and leave the investment decisions for a professional manager . The regulatory limit of TER that can be incurred by a mf AMC has been specified under regulation 52 of SEBI mf regulations
One can invest in mf DIRECTLY . , without involving any distributor / agent through a direct plan . The lower expense translate into higher returns on the investment that keeps compounding over years . When the market is volatile and values fall , independent advice from a professional advisor can help one stay the course . Subequently SEBI issued guidelines on categorization and rationalization of schemes in Oct 2017 into 5 broad categories
For the convenience of mutual fund investors, the Registrars, Computer Age Management Services Limited (CAMS) and KFin Technologies Ltd (KFintech) have in a collaborative initiative, come together to provide a facility for mutual fund investors to get a consolidated account statement (CAS) showing their current holdings across all mutual funds electronically via e-CAS through a mail-back service.
Investors who have registered their email address with mutual funds can avail this facility and receive a soft copy of the e-CAS showing their current holdings across all mutual funds in their registered email address.
The following are the URLs for requesting for the e-CAS from CAMS and KFintech:
CAMS: https://www.camsonline.com/Investors/Statements/Consolidated-Account-Statement
KFintech: https://mfs.kfintech.com/investor/General/ConsolidatedAccountStatement
In addition to the above, investors can also view and download their mutual fund Portfolio & CAS on the portal of MFCentral (https://www.mfcentral.com/), a collaborative online services hub launched jointly by KFintech & CAMS for the convenience of investors to transact across all their folios across all mutual funds. The investor may choose to generate a ‘Summary CAS’ or 'Detailed' CAS, and can choose the desired period, such as Current Financial Year, Previous Financial Year, or Specific Period (not more than 365 days) and generate the Detailed CAS as per requirement.
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