CHAPTER 1
The Concept of Mutual Funds
History of Mutual Funds (Global)
History of Mutual Funds in India
What is a Mutual Fund?
Entities Involved
Relevance of Mutual Funds
Fund Houses in India
AUM distribution as per investor category (overall)
Age-wise analysis of AUM as on 30 Sep ‘12
AUM distribution as per investor category as on 31 March 2013
Age-wise analysis of AUM as on 31 Mar ‘13
CHAPTER 2
Fund Basics
Open Ended Funds
Close Ended Funds
NAV
Accrual Valuation
Mark to Market
Portfolio Maturity
Expense Ratio
Entry Load
Exit Load
Redemption
Listing
Growth Option
Dividend Option
SIP
STP
SWP
Fundamental Attributes
Investment Restrictions
Inter-Scheme Transfer
Investment in Sponsor Company
CHAPTER 3
Valuation (for computing NAV)
Valuation and Mark to Market (MTM) of Securities
Numerical example of NAV valuation
Fair Valuation
CHAPTER 4
Fund Ratings and Rankings
Fund Rating
Rating criteria for capital-protection-oriented funds
Fund Rankings
Ranking Methodology
CHAPTER 5
Fixed Income Fund Categories
Basic classification
Parameter: NAV applicability
Parameter: Portfolio maturity
Parameter: Taxation
Parameter: Redemption
Categorization of non-Liquid Funds
Income Funds
Gilt Funds
Short Term Bond Funds
Ultra Short Term Funds
Close Ended Funds
FMPs
Category-wise as on 31 March 2013
CHAPTER 6
Other Fund Categories
Open-ended Hybrid Funds
MIPs
Balanced Funds
Arbitrage Funds
Fund of Funds (FoF)
Feeder Funds
Exchange Traded Funds (ETFs)
Interval Funds
Close-ended Hybrid Funds
Mandate-defined Allocation Funds
‘Market Participation’ Close-ended Funds
‘Capital Protection Oriented Funds
CHAPTER 7
Taxation of Fixed Income Funds
Dividend Distribution Tax (DDT)
DDT rates for individuals / HUFs
Nuances of DDT
Effective rate of DDT
Efficiency of MFs over other investment avenues
A Comparative with Bank FD tax efficiency
Capital Gains Taxation
Comparative with other investment avenues
Inflation Indexation for LTCG - the Changing Scenario and Investment Planning
Proposed DTC
Differential Treatment for NRIs
Investment Planning
Fund Classification for Tax Purposes
Higher MF DDT rates from 1 June ’13 and Tax Planning
Tax efficiency generated by an AMC
CHAPTER 8
Fund Selection Criteria
Hygiene Factors
AMC / Sponsor / Group
Size of the Fund
Credit quality of portfolio
Fund Performance
Benchmarking
Performance measurement
Rolling Returns
Performance Measurement - Do It Yourself
Fund Selection - Forward Looking
YTM and a Perspective on Return Expectation
Typical Fund Selection Criteria for Corporate Treasuries
CHAPTER 9
Select Regulations
Single Plan Structure
Expense Ratio (B-15)
Exit load
Service Tax
Clear funds rule
Dividend Re-investment / SIP
KYC Requirements
Change of Fundamental Attribute
Minimum Number of investors
Capital Protection Oriented Scheme
Investment in Debt Instruments
Investment in Unrated Debt Instruments
Investments in Short Term Deposits of Scheduled Commercial Banks
Inter-Scheme Transfer
Inter-Scheme Investments
Borrowings
Exit load parity
CHAPTER 10
Investor Guidance
Why invest in fixed income oriented mutual fund schemes?
Fund Category Guidance
Why not do it myself?
What are the channels for selling funds?
How much of diversification is advisable on my investments?
What is the difference between an advisor and a distributor?
What is the implication of colour coding of MF products?
Are Bank FDs better than Mutual Funds?
Dividend Option vis-à-vis Growth Option - which one is better for me?
Frequency of Dividend of MFs - how timing the entry can save me tax?
CHAPTER 11
FAQs
How to choose from so many MFs?
Which is the best AMC?
Which is the best fund?
What do I need to understand to appreciate the performance of a fund?
Where to get the information for doing my research?
If a fund boasts of more awards than others, is it that much better?
I am confused by the names of so many funds, can you guide me?
How much return should I expect from my MF investments?
How to track the performance of my MF holdings?
I am not satisfied with the performance of my fund. Should I exit and enter another fund?
What are the chances of negative returns in my MF investments?
A fund, as per the factsheet published by the AMC, is said to have outperformed the benchmark. Most funds say so. Are all these funds really so good?
My funds report the NAV to me. What is the significance of NAV?
What is the liquidity in my MF investments?
What if the fund manager invests in poor quality instruments and there is a default - do I have to bear the loss?
Is it possible to see the portfolio of a fund before entering into it?
What if they change the portfolio after my investment, without informing me?
How to assess the quality of my advisor / distributor?
Glossary

Index

There are various books that tell you what is a Mutual Fund, but none that guides you on how to make the investments, and none that specializes on fixed income (also known as debt). Practically, Mutual Fund is the only vehicle through which investors can participate in the fixed income market. This book handholds you on the relevant concepts and parameters for investing in fixed income oriented Mutual Fund Schemes.

The language used is lucid and is written with the investor in mind. The contents and explanations cover both the academic and practical aspects. Must read for practicing professionals, investors and academicians.

What They Say . .
The contents and explanations straddle seamlessly between academic and practical, with equal appeal to the academician and the practitioner.
N S Venkatesh, Head - Treasury, IDBI Bank

This book fills the void for a practical guide on fixed income mutual fund investments in India. Must read for investors as well as finance professionals.
Manoj Rane, Vice Chairman - FIMMDA

This book is an attempt to bridge the gap in understanding of Mutual Funds and its extension to the debt markets. At this time when Indian economy is privatizing, fixed income instruments are likely to play a key role in making it serve the economic purpose of distributing wealth to be created by the private sector. The author has made a balanced approach of introducing mutual funds and their fixed income underlying besides arming the readers on how to examine the underlying to know the health of the overlying. A must read for retail and corporate investors and their advisors to help them understand risks and to make right decisions.
V Shunmugam, Chief Economist - MCX-SX