For a retail investor who does not have the time and expertise to analyze and invest in stocks and bonds, mutual funds offer a viable investment alternative.
This is because:
1. Mutual Funds provide the benefit of cheap access to expensive stocks
2. Mutual funds diversify the risk of the investor by investing in a basket of assets
3. A team of professional fund managers manages them with in-depth research inputs from investment analysts.
4. Being institutions with good bargaining power in markets, mutual funds have access to crucial corporate information which individual investors cannot access.
There are several benefits from investing in a Mutual Fund.
A. Small investments: Mutual funds help you to reap the benefit of returns by a portfolio spread across a wide spectrum of companies with small investments. Such a spread would not have been possible without their assistance. Professional Fund Management: Professionals having considerable expertise, experience and resources manage the pool of money collected by a mutual fund. They analyze markets and the economy to select good investment opportunities.
B. Spreading Risk: An investor with a limited amount of fund might be able to invest in only one or two stocks / bonds, thus increasing his or her risk. However, a mutual fund will spread its risk by investing in a number of sound stocks or bonds, across sectors, so the risk is diversified, along with taking advantage of the position it holds. Also in cases of liquidity crisis where stocks are sold at a distress, mutual funds have the advantage of the redemption option at the NAVs (Net Asset Values).
C. Transparency and easy access to information: Mutual Funds regularly provide investors with information on the value of their investments. Mutual Funds also provide complete portfolio disclosure of the investments made by various schemes and also the proportion invested in each asset type and clearly layout their investment strategy to the investor.
D. Liquidity: Closed ended funds have their units listed at the stock exchange, thus they can be bought and sold at their market value. Over and above this the units can be directly redeemed to the Mutual Fund as and when they announce the repurchase.Open ended funds, the units are available for subscriptions redemption on all business days on an ongoing basis.
E. Choice: The large amount of Mutual Funds offer the investor a wide variety to choose from. An investor can pick up a MF scheme depending upon his risk / return profile.
F. Regulations: All the mutual funds are registered with SEBI and they function within the provisions of strict regulation designed to protect the interests of the investor
On the basis of Objective
A. Equity Funds/ Growth Funds
Funds that invest in equity shares are called equity funds. They carry the principal objective of capital appreciation of the investment over the medium to long-term. The returns in such funds are volatile since they are directly linked to the stock markets. They are best suited for investors who are seeking capital appreciation. There are different types of equity funds such as Diversified funds, Sector specific funds and Index based funds.
B. Diversified funds
These funds invest in companies spread across sectors. These funds are generally meant for risk-taking investors who are not bullish about any particular sector.
C. Sector funds
These funds invest primarily in equity shares of companies in a particular business sector or industry. These funds are targeted at investors who are extremely bullish about a particular sector.
D. Index funds
These funds-invest in the same pattern as popular market indices like CNX Nifty Index and BSE Index. The value of the index fund varies in proportion to the benchmark index.
E. Tax Saving Funds
These funds offer tax benefits to investors under the Income Tax Act.Opportunities provided under this scheme are in the form of tax rebates u/s 88, saving in Capital Gains u/s 54EA and 54EB and deductions u/s 80C. They are best suited for investors seeking tax concessions.
F. Debt / Income Funds
These Funds invest predominantly in high-rated fixed-income-bearing instruments like bonds, debentures, government securities, commercial paper and other money market instruments. They are best suited for the medium to long-term investors who are averse to risk and seek capital preservation. They provide regular income and safety to the investor.
G. Liquid Funds / Money Market Funds
These funds invest in highly liquid money market instruments. The period of investment could be as short as a day. They provide easy liquidity. They have emerged as an alternative for savings and short-term fixed deposit accounts with comparatively higher returns. These funds are ideal for Corporates, institutional investors and business houses who invest their funds for very short periods.
H. Gilt Funds
These funds invest in Central and State Government securities. Since they are Government backed bonds they give a secured return and also ensure safety of the principal amount. They are best suited for the medium to long-term investors who are averse to risk.
I. Balanced Funds
These funds invest both in equity shares and fixed-income-bearing instruments(debt) in prescribed proportion. They provide a steady return and reduce the volatility of the fund while providing some upside for capital appreciation. They are ideal for medium- to long-term investors willing to take moderate risks.
A. Capital Appreciation : An increase in the value of the units of the fund is known as capital appreciation. As the value of individual securities in the fund increases, the fund`s unit price increases. An investor can book a profit by selling the units at prices higher than the price at which he bought the units.
B. Dividend Distribution: The profit earned by the fund is distributed among unit holders in the form of dividends. Dividend distribution again is of two types. It can either be re-invested in the fund or can be on paid to the investor.
Though Close-Ended Mutual Funds are listed on the exchange they have a limited number of shares and trade at substantial premiums or more often at discounts to the actual NAV of the scheme. Also, they lack the transparency, as one does not know the constitution and value of the underlying portfolio on a daily basis.
In ETFs, the numbers of units issued are not limited and can be created/ redeemed throughout the day. ETFs rely on market makers and arbitrageurs to maintain liquidity so as to keep the price in line with the actual NAV.
Exchange Traded Funds are essentially Index Funds that are listed and traded on exchanges like stocks. They enable investors to gain broad exposure to entire stock markets in different Countries and specific sectors with relative ease, on a real-time basis and at a lower cost than many other forms of investing.
An ETF is a basket of stocks that reflects the composition of an Index, like Nifty or BSE Sensex. The ETFs trading value is based on the net asset value of the underlying stocks that it represents. Think of it as a Mutual Fund that you can buy and sell in real-time at a price that change throughout the day.
ETFs are modern day Mutual funds which have several advantages over traditional funds. The key advantages of investing in ETFs are the following:
Low cost: Both traditional funds and ETFs charge fund management charges and operating expenses to the Scheme. However, due to the very nature of ETFs, both the expenses are streamlined and much lower as compared to open ended mutual funds charges. ETFs protect the interest of the long term investor from the inflows and outflows of short-term investors.
Portfolio Diversification: ETFs provide exposure to the market through a basket of securities which results in portfolio diversification and better risk management. They provide wide variety of sector, style, industry and country specific funds thereby giving a wide choice of diversification to the investor.
Convenience of Investing: ETFs provides you the convenience of trading during market hours and makes it very convenient to buy and sell at any point of time between 9 am and 3.30 pm (current trading hours). Unlike traditional mutual funds, one need not wait till the closing of market hours to know the price at which the trade is executed. Thus, Investors invests in real-time prices as opposed to end of day prices. If you have brokerage account, all you have to do is either go online and place order or call your broker and place an order. It is as simple as buying any share/stock of a Company.. The procedure is same if you want to redeem your investments partially or fully.
Arbitrage Opportunities: Since ETFs are easy to buy and sell, it also helps an investor to manage his portfolio actively and reduce risk. For example if the investor’s exposure is high on banking stocks and he wants to have a hedge, he can technically short Banking sector ETF or other similar sector ETFs to actively create a portfolio using underlying ETFs.
Transparency: ETFs are as transparent as clear glass. The indicative NAVs are available real time to an investor and so is the basket of securities that consists the portfolio. This will help investor to understand what he is investing into and at what price, thereby making the investment decision an informed one.
Market risk: Like any other market related investment product, ETFs also carry the market risk. Though you cannot mitigate the risk you can always reduce it by investing across markets and sectors.
Trading cost: There is a trading cost to be incurred every time you buy or sell ETFs. The rates will depend on the overall volume that you do across securities with your brokerage firm.
BID – ASK price spread: There is a spread between the bid price (highest price a buyer is willing to pay for a share) and ask price (lowest price a seller is willing to accept for a unit). The amount of spread varies from one ETF to another. The same is neutralized by higher liquidity.
Tracking Error: Index ETFs tracks the underlying index. The returns generated by ETFs can marginally be more or less than the index it tracks. This is due to the fact that the ETFs will maintain some cash in the portfolio unlike the index.
1. Asset Allocation: Asset allocation managing could be difficult for individual investors given the costs and assets required to achieve proper levels of diversification. ETFs provide investors with exposure to broad segments of the equity markets. They cover a range of style and size spectrums, enabling investors to build customized investment portfolios consistent with their financial needs, risk tolerance, and investment horizon. Both institutional and individual investors use ETFs to conveniently, efficiently, and cost effectively allocate their assets.
2. Cash Equitisation: Investors typically seek exposure to equity markets, but often need time to make investment decisions. ETFs provide”Parking Place" for cash that is designated for equity investment. Because ETFs are liquid, investors can participate in the market while deciding where to invest the funds for the longer-term, thus avoiding potential opportunity costs. Historically, investors have relied heavily on derivatives to achieve temporary exposure. However, derivatives are not always a practical solution. The large denomination of most derivative contracts can preclude investors, both Institutional and Individual, from using them to gain market exposure. In this case and in those where derivative use may be restricted, ETFs are a practical alternative.
3.Hedging Risks: ETFs are an excellent hedging vehicle because they can be borrowed and sold short. The smaller denominations in which ETFs trade relative to most derivative contracts provides a more accurate risk exposure match, particularly for small investment portfolios.
4.Arbitrage (Cash Vs Futures) and Covered Option Strategies: ETFs can be used to arbitrage between Cash and Futures Market, as it is very easy to trade. ETFs can also be used for cover Option strategies on the Index.
An ETF is bought and sold much like a share during the trading hours in the stock exchange. Based on the purchases of new units and redemption of existing units, there is continuous creation of new units thus resulting in change of number of outstanding units Since ETFs can issue and redeem units on an ongoing basis, it keeps the market price of ETFs in line with the NAV of the Scheme.
Besides the fund management team, one of the important entities is the Authorized Participant (AP). They are normally referred to as market makers. An agreement is signed between the fund house and several independent APs.
The process flow of creation of shares as they move from the fund company through the AP, to the exchanges and ultimately, to the investors.
When new ETF units are created, the APs either buy or borrow the appropriate basket of shares and exchange them with the Fund for those newly created ETF units. The individual securities and cash basket turned in by the AP must be equal to the NAV published holdings from the previous close. After an ETF creation unit is issued to the AP by the custodial bank, the AP can hold the unit in a company account, trade it to another AP, or break it up into individual ETF units. Individual ETF units trade on the exchanges.
The reverse process occurs when redemption takes place. The AP buys ETF shares in the open market to form the correct quantity for creation of a unit. It then transfers the shares to the fund company who in turn receives securities and a cash portion to the exact NAV of the creation unit.
Exchange Traded Funds (ETFs) are open ended mutual fund schemes, which are traded on stock exchanges like a share and seek investment returns that correspond to the performance of a particular index like Nifty 50 or Nifty Free Float Midcap 100 Index.
It combines the benefit of mutual fund scheme with convenience of trading like a share.
Motilal Oswal MOSt Shares Midcap 100 Exchange Traded Fund (MOSt Shares Midcap 100) is an open ended index Exchange Traded Fund that seeks investment return that corresponds (before fees and expenses) to the performance of Nifty Free Float Midcap 100 Index, subject to tracking error.
The Scheme will invest in the securities which are constituents of Nifty Free Float Midcap 100 Index in the same proportion as in the Index.
Nifty Free Float Midcap 100 Index is formulated by India Index Services & Products Limited (IISL), a joint venture between NSE and CRISIL Ltd. It comprises 100 Free Float Midcap stocks with their weightage in index being determined based on their free float market capitalisation.
The primary objective of the Nifty Free Float Midcap 100 Index is to capture the movement and be a benchmark of the Midcap segment of the market.
Typically the debt fund and especially G-Sec fund has lower risk in term of their price volatility over medium to long term. However yet there are few risks which need to be noted as below.
Credit Risk: The fund has practically NIL credit risk since it invests in Government Securities which is backed by Government of India.
Price Risk: The price of debt instruments including G-Sec is sensitive to changes in market interest rate, an increase in interest rate may cause bond prices to fall. The ETF is expected to have lower risk as compared to long duration G-Sec whereas higher risk as compared to short duration G-Sec.
Reinvestment Risk: Coupons received will be reinvested in the underlying index basis prevailing yield.
Liquidity Risk: The underlying index, includes security which is the most liquid G-Sec in the given duration bucket. Hence fund has low liquidity risk, given historical trend. This above list is indicative and not exhaustive, please read the offer document before investing or contact your financial advisor.
During NFO: Rs 500/- and in multiples of Re 1/- thereafter
On Exchange: Investors can purchase/redeem units of ETF on Stocks Exchanges like equity share; the units can be bought/sold in round lots of 1unit and in multiples thereafter. We have appointed market makers to provide ongoing liquidity to buyers/sellers on exchange.
Directly with AMC: In addition units of ETF can be purchased/redeemed directly with the Mutual Fund for the creation unit size of 20,000 units (approx. amount of basket is INR 950,000/-1 )
As a part of our service offering and in an endeavor to provide complete transparency of the dealings in the clients PMS account, the following reports are emailed to the clients to their registered email id/ mailed to the correspondence address, which will enable the clients to track their portfolios. The reports are sent on a monthly basis before the 10thof the next month.
1. Account Performance Statement
3. Transaction Statement
4.Capital Movement Statement
5.Corporate Action Statement
8.Taxable Gain/Loss statement
9.Clients are provided with a login id and password which will enable 24*7access to the details of the investments on click of a button.
10.Audited reports certified by a CA will be sent to all clients annually after March-year end audit is completed.
Motilal Oswal Asset Management Company Ltd provides discretionary Portfolio Management Services wherein the portfolio manager manages your portfolio without having to bother you with the day to day decisions. The portfolio manager takes all the investment decisions on your behalf.
However, we do a comprehensive reporting to maintain complete transparency in managing your portfolio. You will receive regular updates and a detailed report on your portfolio, allowing you to track its activity and performance.
Your PMS account will activate only after you deposit a minimum of Rs. 50 lacs in the account (combination of cash and stocks). To put in money, you can use one of the following ways:
will be in the name of Motilal Oswal Asset Management Company Ltd.–PMS for all strategies. The strategy names will not be required to be mentioned on the cheques
If you have banking facilities you can transfer funds in Indian Rupees to your PMS account by online transfer (RTGS/NEFT) or wire transfer.
You can open a PMS account with us, if you are:
1. An Individual
2. A Hindu Undivided Families
3. An Association of Persons
4. A Limited Companies
5. An NRI, overseas company, firm, society or an overseas trust (subject to RBI approval)
You can open a PMS account by emailing or calling us at our exclusive PMS desk. Once we receive your request one of our executives will get in touch with you shortly. You can call us on: 1800-200-6626 or email us at: firstname.lastname@example.org.
You can visit our Website: www.motilaloswal.com/Asset-Management
1. Amongst India’s one of the leading PMS Service Providers, with Assets under Management of approx Rs. 2700 Crores as on 31st December 2014.
2. Value Strategy is the single biggest discretionary PMS strategy in the country withal of over Rs. 1225 crores as on 31st December 2014clearly showing client’s trust in our product’s performance &services.
3. Our Flagship “Value Strategy” has consistently outperformed the benchmark across market cycles over a 11 year period.
4. Motilal Oswal PMS has one of the largest active customer base of 4500+ on PMS Platforms on 31st December 2014 clearing showing strong trust developed with customers.
5. 1crore invested in Value PMS in March 2003 is worth Rs. 17.86 crores as on 31stDecember 2014 v/s. just 8.19 Crores if it would have been invested in CNX Nifty Index.
6. Motilal Oswal Portfolio Management Services has active clients in 138 different cities right from Agra to Vijayawada; a testimony of strong acceptance of our PMS across the length & breadth of the country.
Data as on 31st December 2014
Investments in Securities are subject to market and other risks and there is no assurance or guarantee that the objectives of any of the strategies of the Portfolio Management Services (PMS) will be achieved. Investors in the PMS Product are not being offered any guaranteed/assured returns. Past performance of the portfolio manager does not indicate the future performance for any of the strategies.
‘IDCW’ is abbreviation of ‘Income Distribution cum Capital Withdrawal’.
As per the SEBI Circular no. SEBI/HO/IMD/DF3/CIR/P/2020/194 dated October 05, 2020, whenever distributable surplus is distributed under Dividend Plan, the AMCs are required to clearly segregate and disclose (i) income distribution (appreciation in NAV) and (ii) capital distribution (Equalisation Reserve) in the Consolidated Account Statement (CAS) provided to the investors.
SEBI has also stipulated that all the existing and proposed Schemes of Mutual Funds shall name / rename the Dividend option(s) in the following manner:
|Option / Plan (existing)||New nomenclature|
|Dividend Payout||Payout of Income Distribution cum capital withdrawal option|
|Dividend Re-investment||Reinvestment of Income Distribution cum capital withdrawal option|
|Dividend Transfer Plan||Transfer of Income Distribution cum capital withdrawal plan|
What is the purpose of the above regulatory directive?
The regulatory intent of the regulatory directive is to clearly communicate to the investors that, under Dividend Option of a Mutual Fund Scheme, certain portion of the capital (Equalization Reserve) can be distributed as dividend. Accordingly, SEBI circular requires Mutual Funds to rename Dividend option(s) as per the above table.