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Lecture 03 IUIC - MF

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28 views13 pages

Lecture 03 IUIC - MF

Uploaded by

Syed Ali Haider
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Major types of mutual funds

 There are two major types of mutual funds


 Open end & Closed end Mutual Funds. Further categories are as balew
 Money market / Cash mutual funds (Constant NAV Funds)
 Fixed Income / Bond / Aggressive Fixed Income funds (Sukuk for Islamic)
 Balanced & Asset Allocation Funds
 Stock Market Funds
 Commodity Funds
 Pension Funds / Thematic Funds
 Index Funds & Exchange Traded Funds
Further mutual funds can classified on the basis of risk and return
Types of mutual funds
 1. Money market / Cash Funds
 These funds invest in short-dated money market securities
 They usually offer check writing feature also
 They are low risk and low return funds
 They provide the chance to earn the going rate in the money
market with diversification advantage, providing daily returns
 Islamic options also available
 2. Income / Bond Funds
 These fund specialize in fixed income securities
 Within bond funds, there exists many categories
 Funds may specialize in government bonds, or corporate
bonds
 Or they specialize in bonds of different maturities
 3. Hybrid Funds
 Includes both Balanced & Asset Allocation Funds
 They are also called balanced funds
 The main objective is to preserve capital and earn a return
 Have a bit higher risk than the bond funds because of
investment in equity
 4. Equity funds
 All investment is made in common stocks
 Within equity funds, there can be growth funds or income
funds
 Growth funds have investment in stocks that have good
growth potential (usually small firms)
 Income funds have investment in stocks that provide
consistent flow of income(usually large firms)
 5. Sector funds
 Some industries perform well in one stage of business cycle
and others perform well in the other stages of business cycle
 An investment company may have a mutual fund that
specialize only one in sector
 For example, a mutual fund may invest only in Financial or
Energy sector stocks
 6. Index funds / ETFs
 An index fund tries to match the performance of a broad market index
 The fund buys shares in securities in the proportion to the security’s
representation in the index
 It is an unmanaged fund and hence a low cost
 Investors following passive strategy will invest in index fund

 ETFs are listed on an exchange and follow an index based on a


strategy or theme
Mutual Funds Returns

 Mutual funds returns are expressed in total returns i.e.


dividends and capital gains as a percentage of initial
investment
 A cumulative total return measures the actual performance
over a stated period of time, 1 year, 3 years or 10 years
 For example, a fund gave returns:
 Past 1 year Past 5 Years Past 10 years
 -10% 8.5% 18%
Advantages

 Low entry cost/amount


 Exit any time
 Tax advantages
 Diversification
 Professional management
 Power of Compounding
 Instant withdrawal facility from Money Market Funds / ATM cards
 Systematic Investment Plans (SIP)
NAV = Net Asset Value

 Market Value of Assets less liabilities / No. of Units outstanding


(issued)

 Offer Price = NAV * (1+ Sales load in %) OR NAV / (1+sales load in %)


ASSIGNMENT NO 03
FUTURE OF MUTUAL FUNDS IN PAKISTAN
THANK YOU!

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