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BY
KHUSHBOO (IMBA/4533/11)
DEFINITION
A mutual fund is a mediator or trust that brings
together a group of people and invest their money
in stocks, bonds and other securities.
Basically a pool of money collected is invested by
Asset management company (AMC) in different
types of securities.
example:- any one member may be able to buy only
one or two stocks with his money, which means he has
to assume a high degree of risk. By investing through a
mutual fund the risk is reduced because a small
investment can be spread over many stocks.
CONTD.
These schemes provide different options to the
investors like dividend option, capital appreciation, etc
and the investors may choose an option depending on
their preferences.
SECTOR SPECIFIC SCHEME:These are the funds/schemes which invest in the
securities of only those sectors or industries as specified
in the offer documents. Eg Pharmaceuticals, Software,
Fast Moving Consumer Goods (FMCG), Petroleum stocks,
etc The returns in these funds are dependent on the
performance of the respective sectors/industries.
CONTD.
While these funds may give higher returns, they are more
risky compared to diversified funds. Investors need to keep a
watch on the performance of those sectors/industries and
must exit at an appropriate time.
BALANCED SCHEME:The aim of balanced funds is to provide both growth and
regular income as such schemes invest both in equities and
fixed income securities in the proportion indicated in their
offer documents. These are appropriate for investors looking
for moderate growth. They generally invest 40-60 per cent
in equity and debt instruments.These funds are also
affected because of fluctuations in share prices in the stock
markets.
Close-ended schemes:Such funds have a fixed maturity period and are open for
subscription only for a specified period. After the expiry of
this period, investors can buy or sell the units on the stock
exchanges where such funds are listed. Some funds also
have the option of periodic repurchase, whereby investors
can sell back their units to the fund at NAV related prices.
CONTD.
On the basis of investment objective: Income scheme
Growth scheme
Sector specific scheme
Infrastructure scheme
Balanced scheme