Mutual fund
which is called 'mutual fund', but its English name is more popular, is a type of collective investment. Groups of investors together invest in stocks, short-term investments or other securities. UTI AMC is the oldest mutual fund company in India.
1. A mutual fund has a fund manager who determines the fund's investments and maintains profit and loss. The profits and losses incurred in this way are distributed among the investors. Mutual funds are an accessible route for those who wish to invest, even if they do not have sufficient knowledge of the stock market.
2. The mutual fund operator (company) collects the investment amount of all the investors and gives them some convenience. Also charges a fee. Then invests this amount in the market for them. The advantage of investing in This is that the investor does not have to worry about when you buy or sell shares, as this concern is with the fund manager. He is the one who maintains the investment of the investor. Another advantage is that small investors can invest a very small amount, like up to Rs.100 per month. In such a situation, they have to take a systematic investment plan, in which this amount is transferred monthly directly from the bank to the fund.
3. The share price of a mutual fund is called the Net Asset Value or NAV. To calculate this, the total value of the fund is divided by the total number of shares purchased by investors.
4. There are many options available in equity schemes of mutual funds like index funds, diversified funds, large-cap funds, mid-cap schemes and tax-saving schemes. Investors can choose the plan that best suits the investment objectives and goals.
Index plan
Investors who do not want a call for a particular stock can invest in an index based scheme, i.e. index scheme as the index scheme invests only in those particular stocks which are part of a particular index. If the index goes up, the investors are to profit.
Miscellaneous plan
It is also known as Diversified Scheme. If you do not want to stay invested in a particular sector or any one segment of the economy, then the option of a diversified scheme is available.
Open-ended and close ended funds
1. There are two types of units as per issue-Open ended fund units can be issued or paid for at any time during the life of the scheme. Close ended funds cannot issue any new units under the scheme, except bonus or rights issue. For this reason, the unit capital of an open-ended scheme can fluctuate like a share, whereas it is not in the case of a close-ended scheme.
2. One can enter or exit an open-ended scheme at any time. And sometimes they have a lock-in period within which redemption cannot take place, so these should be ensured at the time of admission. In a closed ended plan, the subscription can be taken only once and the redemption can also happen within the minimum stipulated time frame. In this way, the liquidity of the close ended scheme gets reduced.
Large cap and mid-cap
1. People with high risk appetite can opt for small or mid-cap schemes. This scheme invests in small and medium companies with good potential. These are high in risk but have the potential to deliver high returns. Long term investments in the stock market are profitable and short term investors are at high risk.
2. Large cap mutual funds invest in the stock of a blue chip company. Investing in This is considered safe. This is because information about them is available everywhere. Mid-cap mutual funds invest in medium and small sized companies.
Balanced funds
Balanced funds are called hybrid funds. These are common stock, preferred stock, bonds and short term bonds. These funds are profitable as they also reduce the risk factor and ensure the safety of capital to a great extent.
Growth fund
Efforts are made to get maximum benefit with the help of Growth Fund. These are invested in companies that make rapid progress in the market. Investing in these funds is for higher returns and hence carries a higher risk.
Dividend fund
If an investor invests in Dividend Fund. So the dividend given by the companies from time to time also keeps on getting the investor. This cash amount is deposited in the account of the investor.
Value funds
These are funds that give preference to safety. They have relatively little profit, but the potential for loss is very low.
Money market funds
Money markets are generally considered the safest funds. Their main objective is to keep the invested capital safe.
How Mutual Funds are formed?
Mutual Funds are formed as a Trust which is under the Sponsor, Trustee, Asset Management Company (AMC) and Custodian. The trust is established by one or more sponsors. Just like there are promoters in a company, there are sponsors in mutual funds. Mutual fund trustees receive funds for the benefit of investors holds. Security Exchange Board Of India recognized Asset Management Company (AMC) administers funds by investing capital in various securities. The Custodian approved by Security Exchange Board Of India holds the securities of various schemes. The general supervision and control over the AMC rests with the trustees. He conducts the functions of the fund and sees that the rules of Security Exchange Board Of India are complied with. As per Security Exchange Board Of India rules, the director of the trustee company or two-third of the members of the board of trustees should be independent so that they are not associated with the sponsor. Apart from this, 50% of the directors of the AMC should be independent. All mutual funds have to get Security Exchange Board Of India registration before opening any scheme.
Mutual funds in India. By the way, there are many mutual fund schemes in India and when any fund house comes out with a new scheme in the market, then the information about all the terms, conditions and other things related to it is compulsorily available to the Securities and Exchange Board of India (Security Exchange Board Of India). Does it. The document through which this information is given to Security Exchange Board Of India is called 'Scheme Offer Document'. In this, sufficient information related to investment objective, risk factors, load and other expenses etc. is given. Expenditure on various items like advisory, custodial, audit, transfer agent and trustee fees and agent commission etc. in running a mutual fund, full details of the expenditure to be incurred in these items are given in the offer document. Apart from this, it is also mentioned that what are the charges that the investor will have to pay for investing in the scheme, such as entry load, exit load, switching charges, recurring expenses, etc. In a scheme which has lesser expenses, the fund house will have more money for the investor, and it will also lead to higher returns. Such schemes are more profitable for the investors. Under any scheme, if more than 65 percent of the amount is to be invested in equity, then such a plan is called an equity plan. If the company is going to invest equal amount in equity and debt, then such scheme comes under Balanced Scheme. Equity schemes are more risky than balanced schemes.
In India, the role of middlemen for mutual fund investments will be eliminated by 2010. National Stock Exchange i.e. National Stock Exchange and NSDL are jointly developing a trading platform through which units of mutual funds can be bought or sold directly. To avoid monopoly, the Association of Mutual Funds in India has asked Central Depository Services, a part of BSE, and the registrar CAMS to develop a similar platform.
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