| How Funds are sold | | | | centralized record keeping. |
| Mutual Funds primarily depend upon individual | | | | The investment policies of different types of |
| agents and distribution companies to market their | | | | funds are as follows:o Equity Funds. They invest in |
| schemes to the investors. Nowadays, they also | | | | stock. However, they will hold 4% to 5% of their |
| market their schemes directly. | | | | assets in money market securities to offer |
| The individual agents who sell schemes of various | | | | liquidity. Income funds will hold shares of firms |
| Mutual Funds also act as financial advisors to | | | | giving high dividend yield and Growth funds will |
| many investors. Hence they are required to clear | | | | hold shares of firms that enable faster capital |
| various examinations before acting as an agent. | | | | appreciation. Sector funds focus on a particular |
| Many Mutual Funds prefer to deal with distribution | | | | industry.o Debt Funds. These funds invest in |
| agency than individual agents as it is easier to | | | | fixed-income securities. Different funds will |
| manage. These distribution agencies, with their | | | | concentrate on Treasury bills, corporate bonds, |
| highly qualified executives, will be able to offer | | | | Mortgage-backed securities and other kinds of |
| better financial advice than individual agents to the | | | | bonds. Some of the funds also specialize on |
| investors. | | | | maturity.o Index Funds. Index funds buy shares |
| Nowadays, the sales officers and other | | | | that are included in a particular index in proportion |
| employees of the investment companies directly | | | | to each share's representation in that index. |
| approach the investors (particularly the high net | | | | Investing in index funds is a passive strategy |
| worth individuals and corporate clients) to sell | | | | because the investors need not do any security |
| different schemes. However, most of the sales | | | | analysis.o Money Market Funds. These funds |
| of Mutual Funds happen through other distribution | | | | invest in short-term low-risk instruments of the |
| route than from marketing directly. | | | | money market. Since the liquidity is high, some of |
| Investment Policies | | | | the funds even offer cheque writing facilities to |
| Every Mutual Fund has a specified investment | | | | their investors. |
| policy which will be described in the Mutual Fund's | | | | Apart from these funds there are many different |
| prospectus. A family of Mutual Funds will be | | | | varieties of funds with unique investment policies |
| managed by an Asset Management Company. | | | | like the international funds which invest in different |
| This Asset Management Company will collect | | | | securities across the world, the balanced funds |
| funds from investors and charge a management | | | | which minimize risk without compromising heavily |
| fee for operating them. They enable investors to | | | | on growth opportunities and current income and |
| invest across different market sectors and switch | | | | the flexible funds which depend on market timing. |
| assets across funds while still benefiting from | | | | |