Mutual Funds

MUTUAL FUNDS Abhishek Shedjale Roll no. 02

BASICS  Basic s

of MUT UA L FUN D.The ar ti cle men tio ne d belo w, is for the inve stors who have not ye t sta rted inve sting in mutua l fun ds , but will ing to explo re the o ppo rt unit y and al so for those who wa nt to clear the ir bas ics fo r wha t is mut ual fun d a nd how bes t it can serve as an inve stment too l.

Get ting St art ed  Befo re

we move to expl ai n wha t is mut ual f und, it’ s very imp ort ant t o kno w the ar ea in whic h mutua l fun ds works , the b as ic unde rst anding of stoc ks and bonds .

STOCKS  Stocks

represent shares of ownership in a public company. Examples of public companies include Reliance, ONGC and Infosys. Stocks are considered to be the most common owned investment traded on the market.

BONDS 

Bonds are basically the money which you lend to the government or a company, and in return you can receive interest on your invested amount, which is back over predetermined amounts of time. Bonds are considered to be the most common lending investment traded on the market. There are many other types of investments other than stocks and bonds (including annuities, real estate, and precious metals), but the majority of mutual funds invest in stocks and/or bonds.

WORKING OF MUTUAL FUND WORKING

Wh at is a M utual F und? 

It is ju st the conn ec ti ng bri dge or a fin anci al inte rm ediary that allows a grou p o f inv esto rs to pool th eir mon ey tog eth er with a p red etermi ned in ves tmen t ob jec ti ve. The mutu al fun d wil l h ave a fu nd man ager who is res ponsib le fo r in ves ti ng th e gath ere d mon ey in to specif ic secur iti es ( stocks or b on ds). When y ou in ves t in a mu tual fun d, y ou are buy in g u nits or p orti on s of th e mu tu al fu nd and th us on in ves ti ng becomes a share hol der or uni t hol der of the fu nd . Mutu al fu nd s are con sid ered as one of th e bes t avail able inv estme nts as comp are to oth ers t hey are very cos t eff ici ent and also ea sy to in vest i n, th us b y pooli ng mon ey tog eth er in a mu tu al fu nd, inv estors ca n purch ase stocks o r bon ds with mu ch l ow er tradi ng cos ts th an if th ey t ried to d o it on th eir ow n. But th e big gest advanta ge to mutu al fu nds is divers ificat ion , b y min imiz ing risk & m axi miz in g re tu rn s.

Regu la tory Au thoriti es 

To prot ect t he i nt ere st of the inv esto rs, SEBI for mul at es p ol ici es and reg ul at es the mut ual fund s. It n otifi ed reg ul at io ns in 19 93 ( full y revise d in 19 96) and issues guid el ines fr om t ime to time. MF eit her pro mot ed b y pub lic or b y pri vat e sec tor ent iti es inc lud ing one promot ed by forei gn ent ities i s gov erned by these Re gul at ions. SEBI a ppro ved As set Manag ement Comp any (AMC) ma nag es the fund s by ma king inv est ment s in vari ous typ es of securi ties . Cust od ian, reg ist ered wi th SE BI, hol ds the sec uri ties of vari ous sc he mes of the fund in its cust ody.

Ac cordi ng to SEBI Regu la ti ons, two th ird s of th e di re ct ors of Tru ste e Company or boa rd of tru ste es must be inde pen den t. The As soci ation of Mu tu al Funds in In dia (AM FI ) rea ssure s th e in ve st ors in unit s of mutual funds that the mutu al funds funct ion wi th in the str ic t regu latory fra me work . Its obje ct iv e is to incr ea se pu blic awa ren es s of the mu tu al fund in dustry .AMFI als o is en ga ge d in upg ra di ng prof es si on al standa rd s and in prom oti ng be st indu str y pra ct ice s in div er se area s such as va lu ation , dis clos ure, tr anspa re ncy etc .

ABHISHEK SHEDJALE

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