MUTUAL FUNDS: Mutual funds are investment avenues that pool the money of several investors to invest in financial instruments such as stocks, debentures etc. The profits earned on the investments is distributed among the investors on the basis of the units held by each of them. Due to a large pool of investors, the individual risk is spread. So individually you take on low risk. The mutual funds in India are governed by Association of Mutual Funds in India, the umbrella body for mutual funds, which is in turn governed by the Securities and Exchange Board of India. A diagrammatic representation to understand the Cycle”: Various Entities of Mutual Funds: 1. SPONSER: Sponsor is the person who establishes the mutual fund. It can be a group of people or a single person. 2. TRUST: The Mutual Fund is constituted as a trust in accordance with the provisions of the Indian Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian Registration Act, 1908. 3. TRUSTEE: Trustee is usually a company or a Board of Trustees. The main responsibility of the Trustee is to safeguard the interest of the unit holders and to ensure the interest of investors in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996. 4. ASSET MANAGEMENT COMPANY (AMC): The Trustee as the Investment Manager of the Mutual Fund appoints the AMC. The AMC is required to be approved by the Securities and Exchange Board of India (SEBI) to act as an asset management company of the Mutual Fund. 5. REGISTAR AND TRANSFER AGENT: The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent to the Mutual Fund. 6. NAV: NAV or Net Asset Value is the market value of the assets per unit after deducting the liabilities. 7. LOCK-IN PERIOD: If investment is in equity linked saving schemes (ELSS) the lock in period is three years. Which means your money will remain locked in with the mutual fund company for a period of three years. 8. SIP: SIP or Systematic Investment Plan enables you to invest an amount on a regular basis and bring about a disciplined approach to investing. Various Types of Mutual Funds: 1. By structure: Open Ended: These are funds that you can buy and sell any time throughout the year. Close Ended: These are funds that are open only for a specific period after which youd have to buy them from the secondary market; Interval schemes: These schemes combine the features of open ended and close ended schemes and are available for purchase or sale during a select period. 2. By investment objective: Growth: These are highly aggressive schemes and invest mainly in equities. Income: Income funds invest in medium to long-term debt instruments. These are low risk and aim at a fixed current income . Balanced: Also called Hybrid funds, these are a combination of growth, debt and money market funds. Money market schemes: These schemes invest in short term debt instruments and are highly liquid. Tax saving: These are equity linked saving schemes that offer tax benefits under Section 80 C and have a compulsory lock in period of three years. Special schemes: These are select funds that aim at replicating the performance of an index. Also there are funds that invest in specific sectors that fall under this category. Hope you enjoyed. Keep updated!! Some of the Previous Years Questions for Reference: 1. Regulator of Mutual Funds in India-SEBI 2. Full form of NAV- Net Asset Value 3. Full form of AMC- Asset Management Company 4. NAV Fluctuates or Remains Constant or Always Increases or always decreases.- Fluctuates 5. First Mutual Fund to be established in India- State Bank of India 6. Chairman of UTI- Mr. Leo Puri
Posted on: Fri, 31 Jan 2014 09:55:18 +0000