Characteristics of Mutual Funds
The basic Characteristics of Mutual Funds are:
- Regulated by SEBI (Securities Exchange Board of India)
- Managed by AMC (Assets Management Companies)
- The following list is of the most commonly types of investors in India :
- RESIDENT INDIVIDUALS
- NRIs
- PIOs
- HUFs
- Companies
- Partnership Firms
- Trusts
- Cooperative Societies
- Banking and Non- Banking Financial Institutions
- Registered FIIs, QFIs etc.
Modes of Investment in Mutual Funds?
- Via Physical Application Forms
- Via Online Applications Forms
Why applying for the Mutual Funds Online becoming popular?
- Convenience of Investment
- Can Compare and Choose real time
- Independence of Investment
Types of mutual funds in India
As an investor you have a choice as there are different types of mutual funds categorised based on structure, asset class and Based on asset class.
1. Based on asset class
- Equity FundsEquity funds come under the stocks/shares of companies. These are considered high-risk funds but also tend to provide high returns.
- Debt FundsCompany debentures, government bonds and other fixed income assets are the examples of debt funds. They are considered safe investments and provide fixed returns. Also, these are the funds that invest in debt instruments.
- Money Market FundsThey are called and considered as safe investments for those looking to park surplus funds for immediate but moderate returns. e.g. T-Bills, CPs etc.(liquid instruments)
- Hybrid or balanced FundsSuch funds are mix of asset classes and the proportion of equity is higher than debt while in others it is the other way round. Risk and returns are balanced out this way.
- Sector FundsSuch funds means investment in a particular sector of the market e.g. Infrastructure funds invest only in those instruments or companies that relate to the infrastructure sector. The risk involved in these schemes depends on the nature of the sector and the returns are tied to the performance of the chosen sector.
- Index FundsBuying shares representative of the BSE Sensex are examples of Index funds. To mirror the movement and returns of the index, there are instruments that represent a particular index on an exchange.
- Tax-Saving FundsInvestments made in these funds qualify for deductions under the Income Tax Act. These are funds that invest primarily in equity shares. Highly risky but also offer high returns if the fund performs well.
- Fund of fundsSuch funds can be invest by an individual in other mutual funds and returns depends on the performance of the target fund.
2. Based on structure class
- Open-Ended FundsUnits are open for purchase or redemption in such funds through the year. All purchases/redemption of these fund units are done at prevailing NAVs. More people preferred these funds since they offer liquidity to investors.
- Close-Ended FundsUnits can be purchased only during the initial offer period in close-end funds. One can redeemed units at a specified maturity date. To provide for liquidity, these schemes are often listed for trade on a stock exchange.
3. Based on investment objective
- Growth fundsUnder these schemes, money is invested primarily in equity stocks with the purpose of providing capital appreciation.
- Income fundsMoney is invested primarily in fixed-income instruments e.g. bonds, debentures etc. The main purpose behind doing this is to provide capital protection and regular income to investors.
- Liquid fundsMoney is invested primarily in short-term or very short-term instruments e.g. T-Bills, CPs etc. with the purpose of providing liquidity.
Importance of Diversification in Mutual Funds
Regardless of Risk Profile associated with the Mutual Funds, each investment made by an individual has some elements of risk. You can definitely lower risk extent or minimize the potential losses.
Dividing your portfolio is the best way to diversify your investments that are not fully correlated. You should have a healthy mix of equity, debt, money market, sector specific and other type of funds to have a balance portfolio. Even within an asset class such as equity, you should ensure that the funds don’t invest in similar securities. This will help ensure that your portfolio is truly diversified.
Benefits of Mutual Funds
Following are the benefits of Mutual Funds
- Managed by Professional Fund Managers
- Provides Diversification of Risk
- Ease of investment, as the investor can even start investment as low as Rs.500
- Provides Variety of funds for the purpose of investments.
- Easy to Enter and Exit from the investment of mutual funds
- Regulated by SEBI hence provides an element of safety to investments made.
- Mutual funds offers flexibility of switching between funds
Services Offered by Us
As an investor you have a choice as there are different types of mutual funds categorized based on structure, asset class and Based on asset class.
Palankarta will help you in choosing the right mutual fund for investment.
Procedure for Investment
Fill Enquiry
Form
Associate will call
and discuss in length.
Make
Payment
Complete Documentation
& Requirements
Registration
Complete
Why Palankarta?
Palankarta gives an end-to-end service for Mutual Funds.
Experienced Financial
Professionals
Deliver Service
on Time
Cost
Effective
Assured Customer
Satisfaction
No Hidden
Fees / Charges.
Frequently Asked Questions
FAQ
General Questions
A mutual fund is a type of investment vehicle consisting of a portfolio of stocks, bonds, or other securities.
Mutual funds give small or individual investors access to diversified, professionally managed portfolios at a low price.
When it comes to mutual funds, you can make money in three possible ways: Income earned from dividends on stocks and interest on bonds.
A mutual fund pays out nearly all of the net income it receives over the year (in the form of a distribution). An increase in the price of securities (called a ‘capital gain’).
Shares are units of ownership interest in a corporation or financial asset that provide for an equal distribution in any profits, if any are declared, in the form of dividends
Whereas Mutual Funds are the investment entities which invests the money received by the investors in these shares.So your money is thus in the hands of experts
In a nutshell, mutual funds are safe. Investors should not be worried about short-term fluctuations in the returns while investing in them.
You should choose the right mutual fund, which is sync with your investment goal and invest with a long-term horizon.
With mutual funds, you may lose some or all of the money you invest because the securities held by a fund can go down in value. Dividends or interest payments may also change as market conditions change.
An index fund is a type of mutual fund with a portfolio constructed to match or track the components of a financial market index, such as the Standard & Poor’s 500 Index (S&P 500). An index mutual fund is said to provide broad market exposure, low operating expenses and low portfolio turnover.
The expense ratio of a stock or asset fund is the total percentage of fund assets used for administrative, management, advertising, and all other expenses. An expense ratio of 1% per annum means that each year 1% of the fund’s total assets will be used to cover expenses.
Large cap mutual funds are equity funds that invest primarily in the top 100 companies of India. These companies are some of the biggest brands in our country, and most Indians use their products daily
Small-cap Equity Funds are those which invest in equity shares of companies which have smaller capitalization and listed under the 250th rank of the underlying benchmark.
These are diversified mutual funds which can invest in stocks across market capitalization.
Systematic Investment Plan, commonly referred to as an SIP, allows you to invest regularly a fixed sum in your favorite mutual fund scheme/s.
In SIP, a fixed amount is deducted from your savings account every month and directed towards the mutual fund you choose to invest in.