WEALTH MANAGEMENT ASSIGNMENT 8

1. What are Mutual Funds?

A mutual fund is a company that pools money from many investors and invests the
money in securities such as stocks, bonds, and short-term debt. The combined holdings of
the mutual fund are known as its portfolio. Investors buy shares in mutual funds. Each
share represents an investor’s part ownership in the fund and the income it generates
2. What are Income funds?
Income funds are mutual funds or ETFs that prioritize current income, often in the form
of interest or dividend-paying investments. Income funds may invest in bonds or other
fixed-income securities as well as preferred shares and dividend stocks.
3. Who manages the Mutual Fund?
The people who manage the Mutual fund are classified as follows:-
 The sponsors, acting through the trustees, appoints all the functionaries
 Investment Managers, known as AMC
 Registrars and Transfer Agents
 Brokers
 Selling agents and distributors
 Custodians
 Bankers
 Legal Advisors
 Auditors
 Depository participants

4. What are the balanced funds?

These funds invest both in equity and debt instruments in some proportion. It is suitable
for investors who are conservative and have long term orientation.

5. What is the importance of Mutual Funds

 Built-in diversification
When you buy a mutual fund, your money is combined with the money from other
investors and allows you to buy part of a pool of investments.
 Professional management
You may not have the skills and knowledge to manage your investments or want to
spend the time. Mutual funds allow you to pool your money with other investors and
leave the specific investment decisions to a portfolio manager. Portfolio managers
decide where to invest the money in the fund, and when to buy and sell investments.
 Easy to buy and sell
Mutual funds are widely available through banks, financial planning firms, investment
firms, credit unions, and trust companies. You can sell your fund units or shares at
almost any time if you need to get access to your money. But you may get back less
than you invested.
  A wide range of funds to choose from
A young investor with a stable income and many years to invest may feel comfortable
taking more risk to achieve a greater potential return. They may invest in an equity
fund. A mid-career investor trying to balance risk and return more moderately could
invest in a balanced mutual fund that buys a mix of stocks and bonds.
6. What are the Gilt Funds?
Gilts are government securities with medium to long term maturities, typically of more
than one year. Since these funds invest only in securities that are issued by the
government, therefore they do not carry any credit risk.
7. Fund Suitability – Risk vs Returns
Stages of Risk Vs Returns are as follows:-
 Liquid
 Income
 Balanced
 Diversified
 Sector
8. What are the categories of investors eligible to buy MF Units?
The categories of investors eligible to buy MF units are given as follows:-
 Banks
 Indian trusts and charitable institutions
 Insurance companies
 NBFC’S
 Provident funds
 Non – residents Indians
 Resident Individuals
 Indian Companies
9. Bank vs Mutual Funds
BANKS MUTUAL FUNDS
Returns Low Better
Administrative expenses High Low
Risk Low Moderate
Investment option Less More
Network High penetration Low but improving
Liquidity At a cost Better
Quality of Assets Non-transparent Transparent
Interest calculation A minimum balance between Everyday
10th & 30th of every month

Guarantee Maximum of Rs 1 lakh on None

deposit