Skip to main content

Know more about Mutual Funds

A mutual fund is an investment that pools together money from various investors, which are further managed and invested by a professional with a view to achieve more competitive returns. The money collected by the fund manager is thus, invested in different instruments such as shares, debentures and other debt instruments based on the stated objective of the fund. The capital generated from these investments is shared by the holders on the basis of the investments made by them.

Mutual fund investment is the most suitable instrument for most people as it provides an opportunity to invest in a diversified fund through a professional at a relatively low cost. An individual usually finds it difficult to keep a track of his investments, therefore a professionally qualified and experienced fund manager makes the task easy.

The mutual funds industry in India provide investors with a number of products which aim towards shares, debentures, fixed interest securities and many more.

Types of Funds

  • Open and Closed ended funds


An open ended fund does not have a fixed maturity and is always available for subscription. The distinct feature of an open-ended fund is liquidity where an investor can buy and sell units at net asset value (price of a unit of a fund) related prices.
A close ended fund on the other hand is a fixed maturity period, usually ranging from 3-15 years and the fund is open only during a specific period for subscription. The unit capital in this scheme is fixed.

  • Load Funds and No-Load Funds


Load funds refer to the funds that levy charges at the time of entry or exit to the fund from the investor; whereas a no-load fund as the name suggests does not charge anything from the investor at the time of entry or exit to the fund. Entry load is the load charged at the time of entering into the fund by deducting a specific amount of money from the initial contribution towards a scheme. There are a few funds, charging a management fee, where the initial expenses are borne by the Asset management Company/Fund Manager. Here the individual enters or exits depending upon the NAV (net asset value) of the fund.

  • Debt Funds


Debt funds are fixed interest funds which can invest in long-term or short-term bonds. The main objective of investing in a debt fund is to preserve the investment while getting the best interest available. These funds invest in fixed return investments like bonds. Therefore, the risk borne by the investor is lower than any other equity fund.
Debt funds can be classified into three types which are income/bonds, liquid/money market and gilts schemes. Income/bond schemes are the ones that invest in long and medium term instruments like corporate bonds, fixed deposits, etc. Liquid/money market schemes invest in short-term instruments like treasury bills and commercial paper, whereas Gilt funds invests in papers issued by the government. The maturity in these schemes are either long or medium term depending upon the objectives of the scheme.

  • Equity Funds


Equity fund also known as a stock fund, usually invests in equities of listed companies. They principally invest in the securities in share markets which can be either domestic or worldwide markets. It allows the investor to access a diversified portfolio managed by a professional.

There are different types of equity funds in the market, therefore the level of risk in each fund is different depending upon the fund:

  • Balanced Funds


A fund that has a stock as well as a bond component in a single portfolio.. It targets to provide the investor with growth as well as regular income. A unique feature of such funds is that, they manage the downturns in the stock market without much loss to the investor. But, at the same time, they increase less even in a booming market.
Balanced funds, also sometimes known as hybrid funds, invests in various tools thus avoiding excessive risk.

Benefits of Mutual Funds

  • Diversification

A unique feature of Mutual funds is diversification where there is an option of investing into various schemes depending upon the market situation which keeps the finances safe. The value of all funds keep fluctuating but does not go low at the same time, thus reducing the risk.

  • Liquidity

In an open-ended fund, one can get the money back instantly according to the net asset value of the fund. Also, units in a close-ended fund can be sold at the prevailing market prices on a stock exchange. Thus, providing liquidity to the investor.

  • Choice of Schemes

Mutual Funds provide the investor with a stock of schemes to choose from depending upon the investors needs.

  • Professional Management of Funds

Allows professional management where an experienced professional tracks the investors money along with the performance of various funds. The fund manager also guides the investor to invest in the funds, keeping in view the objectives of each scheme.

  • Affordable
An investor can start investing in mutual funds with as low as Rs.1000. Thus, making it affordable for anyone.
 

Popular posts from this blog

Mutual Fund Review: Taurus Tax Shield

    Taurus Tax Shield has seen a turnaround in performance since 2007, but still remains a volatile offering… The fund has seen a turnaround in its performance since 2007 and has delivered impressively during market rallies since then. The portfolio is also more diversified. It contained its downfall to an average level in 2008 but is still one of the most volatile offerings in this category. Bold investors can look at this fund.   Strategy The fund manager invests across the market capitalisation and sectors. The selection of stocks is made on the basis of long-term business prospects and value creation. Fund Insight Launched in March 1996, the fund was a laggard with just two annual outperformances. Concentrated stock bets and high exposure to mid and small caps led to it being hit harder during market downturns. The number of stocks in the portfolio never exceeded 20 and it was not rare to see the top 5 holdings account for around 60 per cent of the portfolio. After b...
Read more

AXIS Long Term Equity Fund - The Best Tax Saver Fund for 2016

  AXIS Long Term Equity Fund - Invest Online   History:   The open ended mutual fund was launched on December 21 in the year 2009. It is benchmarked against BSE 200 and managed by the fund manager JINESH GOPANI. Initially the scheme was called as Axis tax saver fund but later it was renamed as Axis long term equity fund with effect from September 2, 2011. Nature of investment: As far as asset allocation is concerned, 97.52% of the stocks are equity and 0.02% is debt based. The primary focus of the fund is to invest in diversified equity stocks that have higher growth potential. Total asset size of the fund is in the tune of 4,996 CRORE as of June 30, 2015. Performance: The performance of the fund for one year, 3 years and 5 years are 23.6%, 29.9% and 19.1 respectively which are far greater than 6.4%, 14% and 5.6% benchmark figures. It has also preformed fairly well against SBI magnum Tax Gain (G) and HDFC tax saver (G). The growth comparison is enumerated below;                        ...
Read more

10 year NSC launched, all set to give 8.7 per cent

Invest in Mutual Funds Online Download Mutual Fund Application Forms THE government introduced a 10-year National Savings Certificate ( NSC ), which will earn an interest rate of 8.7 per cent per annum. The notification for the launch of the new savings instrument, 10-year National Savings Certificate (IX-Issue), 2011, has been issued, an official statement said. The scheme will come into effect from December 1, it added. Investments in NSC will earn interest at the rate of 8.7 per cent compounded semi-annually, it said, adding that on an investment of Rs 100, the depositor will get Rs 234.35 on maturity of the NSC. There is no upper limit for investment in the certificate, it added. The new scheme will give better returns along with tax benefit to savers. At present, the maturity period of NSC is six years and it qualifies for tax relief for investment up to Rs 1,00,000 under Section 80C. The decision to raise the maturity period of NSC has been taken on the b...
Read more

Health insurance guide - Part I

Insurance, by definition, is morbid. What if I die suddenly? What if my home caught fire? What if I had to undergo expensive medical treatment? What if something that I thought happened only to others befell me? Insurers, who work with large samples, calculate the probability of such an event and, hence, the possibility of them having to pay out a sum of money to mitigate, to the extent possible, the effects of that disaster. However, the possibility of you undergoing some kind of expensive medical treatment during your lifetime is far more likely than you dying suddenly or your house burning down. Given that costs at private healthcare facilities, where you are most likely to land up, is high, and, doubling every four years 10 months or so, the rest of your money life could easily go out of whack if you had to incur such expenses. Just 12 per cent of India's population is covered with some sort of health insurance. Pared to the bone, for a comparatively small price, health insu...
Read more

IDFC Classic Equity Fund

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)   IDFC Classic Equity Fund IDFC Classic Equity is a large-cap equity fund which currently has assets under management worth Rs. 158.52 crore. It was launched in August 2005. The fund is benchmarked against the BSE-200 Index. Performance YTD 1-Year 3-Year 5-Year Since Inception IDFC Classic Equity 0.93 26.61 6.30 1.01 11.65 BSE 200 1.52 17.31 6.00 1.99 12.98 All figures in % as on January 31, 2013; Returns above one-year in CAGR terms ...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now