Mutual Fund

• Any Investment (Equity or Debt) requires in-depth analysis & study of the company, Industry, Economy, world economy, etc. Retail investors seldom have the time and expertise to analyse all these various factors on regular basis. Mutual funds are for those investors who have the risk appetite but lacks time and knowledge of Financial Market Intricacies.


• A mutual fund is a common pool of money in to which investors with common investment objective place their contributions that are to be invested in accordance with the stated investment objective of the scheme as mentioned in the prospectus and is managed by a qualified fund manager. The prospectus is a legal document under SEBI laws and contains a lot of information about the mutual fund.


• Mutual Fund Industry in India is Jointly Regulated by “AMFI” (Association of Mutual fund in India) and “SEBI” (Securities and Exchange Board of India). AMFI is an apex body of all Asset Management Companies (AMC) which has been registered with SEBI.


• In India, in many cases contribution by way of unit purchase can be as little as Rs. 500 and thus even the smallest investor can depend on the expertise of the fund manager in order to maximise the returns on their mutual fund portfolio.


• Ideally, for the safety purpose, one has to bifurcate his/her Investment in Different risk category such as Bank FD, Government Paper, Equity, Gold, Silver, Property etc.. Allocation of Investment of an Individual Investor varies from person to person depending upon his/her Risk Appetite which generally depends on Age, Income, No of dependents, Social Status, Previous savings etc. Keeping the track of all these investment on the regular basis is very difficult. Mutual fund gives a platform to an Investor whereas he can diversify his Investment as per his wish and can still keep track of the same. Now mutual funds units are available in Demat form, which makes it even easier to the track the investment.


• Fund Manager's job is to (a) find the best securities for the fund, given the fund's stated investment objectives; and (b) keep track of investments and changes in market conditions and adjust the mix of the portfolio, as and when required.


• Mutual funds offer a tremendous variety of schemes as above. This variety is beneficial in two ways: first, it offers different types of schemes to investors with different needs and risk appetites; secondly, it offers an opportunity to an investor to invest sums across a variety of schemes, both debt and equity. For example, an investor can invest his money in a Growth Fund (equity scheme) and Income Fund (debt scheme) depending on his risk appetite and thus create a balanced portfolio easily or simply just buy a Balanced Scheme. It also allows you to balance your investment in different sectors such as auto, textile, information technology, Art, realty, Infrastructure etc..


• A fund can be Open Ended or Close ended. Open ended fund are open for entry and exit at any time during the continuation of the fund at their existing NAV. In close ended fund Entry as well Exits are at pre determined period. Many of the close ended fund do allow exit at the time other than the pre determined period but at a higher cost by the way of Exit Loads. Open-ended mutual funds disclose their Net Asset Value (“NAV”) daily and the entire portfolio monthly. This level of transparency, where the investor himself sees the underlying assets bought with his money, is unmatched by any other financial instrument


• The investor may opt for a Systematic Investment Plan (“SIP”) or a Systematic Withdrawal Advantage Plan (“SWAP”). In addition to this an investor receives account statements and portfolios of the schemes l the completion of such a lock-in period.
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  We have tried to give below the major Type of Mutual Fund Scheme that exists today. Mainly Three Type of Mutual Fund scheme Exists in India