Mutual Funds in India - Various Schems, Tips for Invesments in Mutual Funds, Latest Net Asset Values (NAVs) of various MF schemes Types of Mutual Funds in Indian context
MUTUAL FUNDS IN INDIA
| Tips for Investments in Mutual Funds | Compare online various schemes of Mutual Funds | Check Latest NAVs of Indian Mutual Funds |
What is a Mutual Funds and How does these work?
Mutual fund is a
kind of trust that manages the pool of
money collected from various investors and it is managed by a team of professional fund
managers (usually called an Asset Management Company) for a small fee.
The investments by the Mutual Funds are made in equities, bonds, debentures,
call money etc., depending on the terms of each scheme floated by the
Fund. The current value of such investments is now a days is
calculated almost on daily basis and the same is reflected in the Net Asset
Value (NAV) declared by the funds from time to time. This NAV keeps on
changing with the changes in the equity and bond market. Therefore,
the investments in Mutual Funds is not risk free, but a good managed Fund can
give you regular and higher returns than when you can get from fixed deposits of
a bank etc.
Why Should I Invest in a Mutual Fund when I can Invest Directly in the Same Instruments :
We have already mentioned that like all other investments in equities and debts, the investments in Mutual funds also carry risk. However, investments through Mutual Funds is considered better due to the following reasons :-
Your investments will be managed by professional finance managers who are in a better position to assess the risk profile of the investments;
Your small investment cannot be spread into equity shares of various good companies due to high price of such shares. Mutual Funds are in a much better position to effectively spread your investments across various sectors and among several products available in the market. This is called risk diversification and can effectively shield the steep slide in the value of your investments.
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WHAT ARE VARIOUS TYPES OF MUTUAL FUNDS A common man is so much confused about the various kinds of Mutual Funds that he is afraid of investing in these funds as he can not differentiate between various types of Mutual Funds with fancy names. Mutual Funds can be classified into various categories under the following heads:- (A) ACCORDING TO TYPE OF INVESTMENTS :- While launching a new scheme, every Mutual Fund is supposed to declare in the prospectus the kind of instruments in which it will make investments of the funds collected under that scheme. Thus, the various kinds of Mutual Fund schemes as categoried according to the type of investments are as follows :- (a) EQUITY FUNDS / SCHEMES (b) DEBT FUNDS / SCHEMES (also called Income Funds) (c ) DIVERSIFIED FUNDS / SCHEMES (Also called Balanced Funds) (d) GILT FUNDS / SCHEMES (e) MONEY MARKET FUNDS / SCHEMES (f) SECTOR SPECIFIC FUNDS (g) INDEX FUNDS B) ACCORDING TO THE TIME OF CLOSURE OF THE SCHEME :- While launching a new schemes, Mutual Funds also declare whether this will be an open ended scheme (i.e. there is no specific date when the scheme will be closed) or there is a closing date when finally the scheme will be wind up. Thus, according to the time of closure schemes are classified as follows :- (a) OPEN ENDED SCHEMES (b) CLOSE ENDED SCHEMES
C) ACCORDING TO TAX INCENTIVE SCHEMES :- Mutual Funds are also allowed to float some tax saving schemes. Therefore, sometimes the schemes are classified according to this also:- (a) TAX SAVING FUNDS (b) NOT TAX SAVING FUNDS / OTHER FUNDS (D) ACCORDING TO THE TIME OF PAYOUT :- Sometimes Mutual Fund schemes are classified according to the periodicity of the pay outs (i.e. dividend etc.). The categories are as follows :- (a) Dividend Paying Schemes (b) Reinvestment Schemes The mutual fund schemes come with various combinations of the above categories. Therefore, we can have an Equity Fund which is open ended and is dividend paying plan. Before you invest, you must find out what kind of the scheme you are being asked to invest. You should choose a scheme as per your risk capacity and the regularity at which you wish to have the dividends from such schemes. |
SOME OF THE TERMS USED IN MUTUAL FUNDS
| Net Asset Value (NAV) |
| Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date. |
| Sale Price : It is the price you pay when you invest in a scheme and is also called "Offer Price". It may include a sales load. |
| Repurchase Price : - It is the price at which a Mutual Funds repurchases its units and it may include a back-end load. This is also called Bid Price. |
| Redemption Price : It is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. Such prices are NAV related. |
| Sales Load / Front End Load : It is a charge collected by a scheme when it sells the units. Also called, ‘Front-end’ load. Schemes which do not charge a load at the time of entry are called ‘No Load’ schemes. |
| Repurchase / ‘Back-end’ Load : |
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It is a charge collected by a Mufual Funds when it buys back / Repurchases the units from the unit holders. |