| article_content"> | | | | Closed Ended Schemes: These funds have a |
| As you probably know, Mutual Funds in India is | | | | stipulated maturity period (ranging from 3 years |
| gaining ground & have become a extremely | | | | to 10 years). The 'Unit Capital' of such schemes is |
| popular investment option. The fund industry has | | | | fixed as it makes a one time sale of a fixed |
| witnessed healthy growth in last five years or so. | | | | number of units. After the offer closes, closed |
| For the individuals wanting to build their wealth | | | | ended funds do no allow investors to buy or |
| over a long period, mutual funds can be the most | | | | redeem units directly from funds. However, to |
| important ingredient to their investment plan. | | | | provide liquidity to investors, closed ended funds |
| It’s one of the most popular investment | | | | are listed on stock exchanges. Some close-ended |
| avenue in today’s dynamic and fast | | | | schemes give you an additional option of selling |
| evolving markets. | | | | your units to the Mutual Fund through periodic |
| Mutual Fund is nothing but a common pool of | | | | repurchase at NAV related prices. SEBI |
| savings created by a number of investors & | | | | Regulations ensure that at least one of the two |
| is an ideal investment product for an individual | | | | exit routes are provided to the investor under |
| investor. Different investors with common | | | | the close ended schemes. |
| investment objective contribute to create a | | | | Interval Schemes: These combine the features of |
| common pool of money & this money is | | | | open-ended and close-ended schemes. They may |
| then invested by fund manager according to the | | | | be traded on the stock exchange or may be |
| objective of the scheme. | | | | open for sale or redemption during predetermined |
| Mutual Funds can help investors in virtually entering | | | | intervals at NAV related prices.b) By Investment |
| the equity market with hands-off approach. There | | | | Objective: |
| is a wide range of Mutual Fund available in the | | | | Growth Schemes: Aims to provide capital |
| market, each one having diverse specifications to | | | | appreciation over the medium to long term. These |
| meet your requirements | | | | schemes normally invest a majority of their funds |
| There are numerous benefits of investing in | | | | in equities and are willing to bear short term |
| mutual funds and one of the key reasons for its | | | | decline in value for possible future appreciation. |
| phenomenal success in India is the range of | | | | These schemes are not for investors seeking |
| benefits they offer, which are unmatched by | | | | regular income or needing their money back in the |
| most other investment avenues. | | | | short term. |
| Benefits of Investing through Mutual Funds: | | | | Income Schemes: Aim to provide regular and |
| For an investor, mutual fund offer wide range of | | | | steady income to investors. These schemes |
| benefits. Some of the key benefits include:- | | | | generally invest in fixed income securities such as |
| 1.Portfolio Diversification:- Mutual funds are a | | | | bonds and corporate debentures. Capital |
| convenient and affordable way of gaining access | | | | appreciation in such schemes may be limited. |
| to a wide range of investments that would be | | | | Balanced Schemes: Aim to provide both growth |
| very difficult and time-consuming to purchase and | | | | and income by periodically distributing a part of |
| manage individually. Because mutual funds typically | | | | the income and capital gains they earn. They |
| hold 50 to 100 different investments, they offer | | | | invest in both shares and fixed income securities |
| a degree of diversification that would be difficult | | | | in the proportion indicated in their offer |
| to achieve on your own. | | | | documents. In a rising stock market, the NAV of |
| 2.Professional management: Actively managed | | | | these schemes may not normally keep pace or |
| mutual funds also give you the benefit of | | | | fall equally when the market falls. |
| professional investment management. The | | | | Money Market / Liquid Schemes: Aim to provide |
| investments are selected by experienced | | | | easy liquidity, preservation of capital and |
| professionals who devote themselves exclusively | | | | moderate income. These schemes generally |
| to tracking the markets, analyzing investments | | | | invest in safer, short term instruments such as |
| and implementing a consistent investment | | | | treasury bills, certificates of deposit, commercial |
| strategy. | | | | paper and interbank call money. Returns on these |
| 3.Flexibility to meet your needs and goals: A wide | | | | schemes may fluctuate, depending upon the |
| range of mutual funds are available to help meet | | | | interest rates prevailing in the market.c) Other |
| the needs of every type of investor, from | | | | Equity related Schemes: |
| conservative to very aggressive. Mutual funds can | | | | Tax Saving Schemes: These schemes offer tax |
| also help you meet a variety of investment goals, | | | | incentives to the investors under tax laws as |
| from establishing an emergency fund to saving | | | | prescribed from time to time and promote long |
| for a vacation, retirement or education. | | | | term investments in equities through Mutual Funds. |
| 4.Convenient Administration: Investing in a Mutual | | | | Sector Funds: Equity funds that invest in a |
| Fund reduces paperwork and helps you avoid | | | | particular sector/industry of the market are |
| many problems such as bad deliveries, delayed | | | | known as Sector Funds. The exposure of these |
| payments and unnecessary follow up with | | | | funds is limited to a particular sector (say |
| brokers and companies. Mutual Funds save your | | | | Information Technology, Auto, Banking, |
| time and make investing easy and convenient. | | | | Pharmaceuticals or Fast Moving Consumer Goods) |
| 5.Return Potential: Over a medium to longterm, | | | | which is why they are more risky than equity |
| Mutual Funds have the potential to provide a | | | | funds that invest in multiple sectors. |
| higher return as they invest in a diversified basket | | | | Index Funds: These funds have the objective to |
| of selected securities. | | | | match the performance of a specific stock |
| 6.Low Costs: Mutual Funds are a relatively less | | | | market index. The portfolio of these funds |
| expensive way to invest compared to directly | | | | comprises of the same companies that form the |
| investing in the capital markets because the | | | | index and is constituted in the same proportion as |
| benefits of scale in brokerage, custodial and other | | | | the index. Equity index funds that follow broad |
| fees translate into lower costs for investors. | | | | indices (like S&P CNX Nifty, Sensex) are less |
| 7.Liquidity: In open-ended schemes, you can get | | | | risky than equity index funds that follow narrow |
| your money back promptly at Asset Value (NAV) | | | | sectoral indices (like BSEBANKEX or CNX Bank |
| related prices from the Mutual Fund itself. With | | | | Index etc). Narrow indices are less diversified and |
| close-ended schemes, you can sell your units on a | | | | therefore, are more risky. |
| stock exchange at the prevailing market price or | | | | Fund of Funds: Mutual funds that do not invest in |
| avail of the facility of repurchase through Mutual | | | | financial or physical assets, but do invest in other |
| Funds at NAV related prices which some | | | | mutual fund schemes offered by different AMCs, |
| close-ended and interval schemes offer you | | | | are known as Fund of Funds. Fund of Funds |
| periodically. | | | | maintain a portfolio comprising of units of other |
| 8.Transparency: You get regular information on | | | | mutual fund schemes, just like conventional mutual |
| the value of your investment in addition to | | | | funds maintain a portfolio comprising of equity |
| disclosure on the specific investments made by | | | | debt/money market instruments or non financial |
| your scheme, the proportion invested in each | | | | assets. |
| class of assets and the fund manager’s | | | | How safe is investing in Mutual Funds? |
| investment strategy and outlook. | | | | In India mutual funds function as trusts. The |
| 9.Flexibility: Through features such as Systematic | | | | sponsor of the fund appoints Board of Trustees |
| Investment Plans (SIP), Systematic Withdrawal | | | | who act as guardians of investor's money. The |
| Plans (SWP) and dividend reinvestment plans, you | | | | board or Trustee Company, as an independent |
| can systematically invest or withdraw funds | | | | body acts as the protector of the unit holder's |
| according to your needs and convenience. | | | | money. These trustees ensure that investor's |
| 10.Choice of Schemes: Mutual Funds offer a | | | | interest is safeguarded and that the AMC's |
| variety of schemes to suit your varying needs | | | | operations and Fund Manager's actions are along |
| over a lifetime. | | | | the professional lines. To ensure independence of |
| 11.Well Regulated: All Mutual Funds are registered | | | | Board of Trustees, SEBI mandates a minimum of |
| with SEBI and they function within the provisions | | | | two-third independent directors on the board of |
| of strict regulations designed to protect the | | | | Trustee Company. |
| interests of investors. The operations of Mutual | | | | Apart from Trustees, the entire mutual fund |
| Funds are regularly monitored by SEBI. | | | | industry functions under the preview of SEBI. This |
| Types of Mutual Fund Schemes:- | | | | structure and stringent guidance make investing in |
| There are a wide variety of Mutual Fund schemes | | | | mutual funds safe and easy. Fund Managers also |
| that cater to your needs, whatever your age, | | | | have to function within the broad framework and |
| financial position, risk tolerance and return | | | | rules & regulations designed by AMC. |
| expectations.a) By Structure: | | | | Mutual funds are considered as favorable |
| Open Ended Schemes: These do not have a fixed | | | | investment vehicle for individual investors |
| maturity. The key feature is liquidity. You can | | | | particularly for investors who have limited |
| conveniently buy and sell your units at Net Asset | | | | resources available in terms of capital and ability |
| Value(NAV) related prices, at any point of time. | | | | to carry out their investment decisions. |