| Introduction: | | | | schemes with insurance cover also. This is the real |
| Mutual is a type of investment vehicle where | | | | growth in the mutual fund sector. It attracts the |
| investors pool their resources in order to | | | | eyes of all segments. |
| participate in a portfolio of securities. Portfolio is | | | | Mutual funds collect the funds from the investor |
| the combination of various assets. Investing | | | | and invest the same in securities and converted in |
| directly in stock market is risky and requires | | | | units. Initially each unit priced at Rs. 10 and |
| professional knowledge for managing equity | | | | invested in market. The growing fund in the |
| investments. But in case of mutual fund reduces | | | | market is called as Net Asset Value (NAV). NAV |
| many inconveniences. The investors don’t | | | | is the market value of the securities held by the |
| actually own each security but instead, he owns | | | | scheme. Since the price of the security is varies |
| shares of the mutual fund. The main benefit of a | | | | the NAV also vary. The net asset value per unit |
| mutual fund is that it provides a way for the | | | | is the market value of securities held divided by |
| investor to achieve diversification in his | | | | the total number of the units outstanding. |
| investments without having to invest. | | | | Classification |
| Investment in mutual fund offers you multi | | | | On the basis of the maturity period, a mutual |
| benefits and reduces time and cost consuming | | | | fund scheme can be classified into open-ended |
| effort. You may me wondering what the reason | | | | scheme or close-ended scheme. An open-ended |
| for selecting a mutual fund is. It is simple; mutual | | | | fund or scheme is one that is available for |
| funds offer six large benefits over owning the | | | | subscription and repurchase on a continuous basis. |
| stocks individually. Those benefits are | | | | These schemes do not have a fixed maturity |
| diversification, professional fund management, | | | | period. The key feature of open ended scheme is |
| hedge against inflation, capital growth, liquidity and | | | | liquidity. |
| leverage for risk reduction through Systematic | | | | A close-ended fund or scheme has a stipulated |
| Investment Plan (SIP). To avail these benefits, the | | | | maturity period. This fund is open for subscription |
| investors need not invest much more, just Rs. | | | | only for a specific period at the time of launch. |
| 5000 or even some mutual fund companies’ | | | | Investors can invest in the scheme at the time of |
| offers below Rs. 1000. | | | | the initial public issue and thereafter they can buy |
| Diversification is the efficient allocation of funds in | | | | sell the units of the scheme on the stock |
| various assets, it helps to reduce or minimize the | | | | exchanges where the units are listed. |
| risk. We this effort, the investors can reduce | | | | On the basis of investment objective, a scheme |
| financial risk and business risk. By owing shares of | | | | can be classified as growth scheme, income |
| multiple companies, the fund value is not | | | | scheme and balanced scheme. The aim of growth |
| devastated if an individual company has attained | | | | funds is to provide capital appreciation over the |
| poor performance. Selecting securities, the | | | | medium to long-term. Such schemes normally |
| allocation of cash in securities, and timing of | | | | invest a major part of their corpus in equities. |
| purchase done by the fund manager. The fund | | | | Such funds have comparatively high risks. These |
| manger has the training, time and the resources | | | | schemes provide different options to the |
| to make the best informed investment decisions. | | | | investors like dividend options, capital appreciation, |
| The professional fund management employs the | | | | etc. and the investors may choose an option |
| active strategy to preserve fund in market place. | | | | depending on their preferences. |
| This eliminates the investor anxiety in selecting | | | | The income fund provides regular and steady |
| equity. If the market performance is fine, the | | | | income to investors. Such schemes generally |
| yield for the MF investor is abundance. The | | | | invest in fixed income securities such as bonds, |
| investors are allowed to enter and exit any during | | | | corporate debentures, government securities and |
| the fund life if the fund is open-ended in nature. | | | | money market instruments. Thirdly balanced |
| The recent day development in systematic | | | | funds provide both growth and regular income. |
| investment route fetches much attention of the | | | | Apart from this money market funds provide |
| MF as well as all investors. It derives the | | | | easy liquidity, preservation of capital and |
| advantage both in the uptrend and downtrend of | | | | moderate income. Some mutual fund |
| the market movement. In down trend there is | | | | companies’ floats NFOs on a particular sector |
| more in the form of units, while in uptrend more | | | | or on concentrating a particular benchmark index |
| is the profit. | | | | of a stock exchange. |
| Some mutual fund providers now offer their | | | | |