Mutual Fund Concept
A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized is shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund:
Advantages of Mutual Funds
- Professional Management
- Diversification
- Convenient Administration
- Return Potential
- Low Costs
- Liquidity
- Transparency
- Flexibility
- Choice of schemes
- Tax benefits
- Well regulated
Types of Mutual Funds schemes
- By Structure
- Open – Ended Schemes
- Close – Ended Schemes
- Interval Schemes
- By Investment Objectives
- Growth Schemes
- Income Schemes
- Balanced Schemes
- Money Market Schemes
- Other Schemes
- Tax Saving Schemes
- Special Schemes
- Index Schemes
- Sector Specific Schemes
Frequently Used Terms
Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date.
Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load.
Is the price at which a close-ended scheme repurchases its units and it may include a back-end load. This is also called Bid Price.
Is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. Such prices are NAV related.
Is a charge collected by a scheme when it sells the units. Also called, ‘Front-end’ load. Schemes that do not charge a load are called ‘No Load’ schemes.
Is a charge collected by a scheme when it buys back the units from the unit holders?
What our clients say
Panam Shares and Services have been handling my equity and mutual fund portfolio for the past 2 years. The recommendations provided by them have always been precise and accurate. The Mutual fund desk is extremely efficient and prompt for the requirements that we have had. More than making money for themselves they help client make the right and informed decisions that are beneficial to the client.
– Ketul Mehta, Business, Mumbai