Introduction to MF

MUTUAL FUND:

Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal.

Mutual fund is meant for the small investors. This does not require careful analysis like stock market.

WHY INVESTORS CHOOSE MUTUAL FUND INSTEAD OF OTHER FINANCIAL INSTRUMENTS:

1. Tax redemption is the reason for the employees as well as business man to invest in mutual fund.

2. Diversification of amount invested

3. Potential return

4. Low cost

5. Liquidity

6. Transparency

7. Many choice of scheme

WHAT KIND OF INVESTORS WILL INVEST IN MUTUAL FUND?

1. Investors who has to play safe in multiplication of their invested amount.

2. Investors who need high return in long period with low risk.

These kinds of investors will prefer MUTUAL FUND.

WHAT IS THE EXPECTATION OF THE INVESTORS?

Investors are not intended to know:

1. What Asset Management Company is doing with their amount?

2. How NAV is calculated?

3. How expense ratio is calculated?

4. In which company fund manager diversified their amount?

5. What is the objective of their Asset management company?

INVESTORS ARE INTENDED TO KNOW:

1. Higher return with lower risk

2. Higher return with lower risk

3. Higher return with lower risk

There are two types of scheme in mutual fund. (By structure)

1. Open ended scheme

2. Close ended scheme

OPEN ENDED SCHEME

Open ended funds can issue and redeem units any time during the life of the scheme.

Unit capital of open ended funds can fluctuate on daily basis

New investors can join the scheme by directly applying to the mutual fund at applicable net asset value related prices

CLOSE ENDED SCHEME

While close ended funds cannot issue new units except in case of bonus or rights issue.

New investors can buy the units from secondary market only.

WHAT ARE THE TYPES OF FUND? ( By objective)

1. DIVIDEND

2. GROWTH

3. DIVIDEND RE INVESTMENT

4. INDEX

5. SECTOR SPECIFIC FUND.

6. TAX SAVING FUND.

TO THE KNOWLEDGE OF INVESTORS:

Process of mutual fund:

How NAV is calculated?

It is calculated by deducting all liabilities (except unit capital) of the fund from the realisable value of all assets and dividing by number of units outstanding.

REASON FOR INVESTING IN EQUITY FUNDS:

Now a day’s all asset management company is investing the in equity. Indirectly mutual fund is dependent on stock market.

1. Maintaining the liquidity.

2. 10% tax payment on dividend is not applicable for fund which invested more than 50% in equities.

3. Transparency.

INVESTORS KNOWLEDGE BEFORE INVESTING:

1. Comparing the growth of NAV.

2. Rating given by the credit rating agency

3. Backup of fund manager.