Paradigms of Mutual Funds

Introduction

In the current scenario, one of the next investment options in the financial market is mutual funds. The special characteristics of mutual funds are: easy availability, risk containment, liquidity, transparency, professional management and decent returns, these above characteristics attract small investors mainly from the middle class, investors play a safer game compared to the stock ups and downs. market.

Many private financial organizations like ING VYSA Bank, Standard Chartered Mutual Fund, etc. are good examples, allowing investors to start with just Rs 500. Investors seem to have accepted the importance of mutual funds and know that they are ready to invest under various mutual fund schemes.

Suitability of Funds

The mutual fund suits all kinds of investors who are interested in raising their personal funds. Investments are based on the risk factor of the investor, if the risk is higher, the return is also high, similarly, if the risk is low, the return on a particular investment will also be low.

If the risk is slightly averse, the investor should prefer a balanced fund, which invests only up to 60-70% in stocks. If the investor wants to go more risk averse, stick to growth funds. If the investor wants regular returns, then the investor should look for income funds, with an average risk but the risk is lower than the equity fund. Mutual fund managers make fund decisions based on the investors’ investment objective. They can opt for liquid funds such as cash funds or short-term floating rate funds. They can also choose funds based on when you want to get your funds back. For the investor who wants a quick, short-term return, a short-term bond fund would be fine since the return will be within three to six months. An income fund or a stock fund would fit the bill if the investor willing to pay the fund left it with the fund manager for more than a year.

Even within each category, you can pick and choose, I mean, in equity funds, for example, you have a variety of options: blue chip funds, mid-cap funds, contrarian funds, opportunity funds, equity yield funds. dividends, sectoral funds that invest specifically in selected business segments, etc. Share-linked savings plans allow you to earn taxable earnings of up to Rs 1 lakh (Rs 100,000) per year.

Many equity funds offer the option of a systematic investment plan (SIP) that allows you to invest a certain amount each month or quarter. This amount is fixed for each installment to be paid. In this way, it not only disciplines its investments but, to a large extent, an investor can protect himself against the vagaries of the market.

Debt funds aren’t lackluster either. The investor can choose between medium term debt funds, short term bond funds, floating rate funds, dynamic bond funds and cash funds. If an investor wants an aggressive debt fund, he can opt for gold funds. If the preference is a combination of equity and debt, MIPs or balanced funds would be fine.

Fair and transparent dealings

A mutual fund is nothing more than a group savings fund. Various investors have banded together to invest in stocks, bonds, or both. However, mutual funds are strictly regulated. They have to declare their portfolios from time to time. Almost all funds declare their portfolios every month.

A fund’s net asset value (NAV), which indicates how much a unit of the fund is worth on a particular day, is reported each business day. You know where your money is going and how it is performing in the market.

Easy access and availability in the market:

A few years ago, even if you wanted to buy a mutual fund, it wasn’t easy. Few distributors, most of them small, sold mutual funds. The quality of his advice often left much to be desired. But today, you can buy mutual funds in more than 60 cities and towns, either through their own offices or through banks.

All private sector banks now sell mutual funds at most branch windows. Some public sector banks have also started to market mutual funds through selected branches.

professionally managed

When you buy a mutual fund, you hand over the task of investing to a qualified and probably more knowledgeable fund manager, who gets paid to find the right opportunities for you. The service standards set by mutual fund companies are better compared to other funding sources. Like other sources of fundraising they are riskier than mutual funds as their investors have to do direct dealings. As an example, most fund distributors will come to your residence or office and explain the features of the product and cash your check as well.

If you want to sell your fund, you can also do so fairly quickly, mostly within one or two business days. There is no paperwork to fear. For example, in the case of some income funds, the money will be credited directly to your bank account if the account is held at select banks.

In the case of systematic investment plans, you can also do this with automatic debits. Each month, on the day you choose, your bank account will be debited with a particular amount and specific units of available mutual funds will be purchased for that amount. No more hassles of writing postdated checks.

Despite all these facilities, you may have countless questions and queries. Mutual funds offer free lines at over 200 locations. For example, free phone line, you can learn about valuations, request account statements and even redeem your investments without any personal identification number.

Conclution

Investing in mutual funds is better than other fundraising funds and in the years to come will prove to be the best source of investors. If past fundraising numbers are any indication, investors appear to have taken notice. Both public mutual funds and private mutual funds are doing better. The result is moving on the upward curve of the financial market. In short, mutual funds offer the investor ample options of various schemes with special features and can be chosen as per the investor’s requirements.

**********

References

1. Mc. Donald, Objectives and Performance of Mutual Funds, 1991-Pg33-35.

2. RAR Reddy, Mutual Fund Industry, 2002, pg220-226

3. K.Ashwathtappa-Mutual Fund Growth and Development, 2006, 3rd Edition, pp. 12-19.

4. Journal of Financial and Quantitative Analysis, 311-333.

5. “Portfolio Performance”-The ICFAI Journal, 2002.

6. Portfolio Organizer-Growth in demand for Mutual Funds, 2007.