Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk tolerance and return expectations etc. The table below gives an overview into the existing types of schemes in the Industry.
By Structure
::Open-Ended Schemes
::Close-Ended Schemes
::Interval Schemes
By Investment Objective
::Growth Schemes
::Income Schemes
::Balanced Schemes
::Money Market Schemes
Other Schemes
::Tax Saving Schemes
::By Investment Avenues
::Industry Specific Schemes (Sectoral Schemes)
::Index Schemes
::Sectoral Schemes
Returns on Mutual Fund Schemes
Growth Plan:
Under the Growth Plan, the investor realizes only the capital appreciation on the investment (by an increase in NAV) and does not get any income in the form of dividend. This works as a cumulative scheme.
Dividend Plan:
Under the Income Plan, the investor realizes income in the form of dividend. However his NAV will fall to the extent of the dividend.
Dividend Re-Investment Plan:
Here the dividend accrued on mutual funds is automatically re-invested in purchasing additional units in open-ended funds. In most cases mutual funds offer the investor an option of collecting dividends or re-investing the same.
Systematic Investment Plan (SIP) :
SIP is a feature specifically designed for those who are interested in building wealth over a long-term at a lower level of risk. Since, equities historically have outperformed other asset classes, the Systematic Investment Plan tries to lower the risk of timing the entry by averaging. Anyone can enroll for this facility by starting an account with by giving 6 post-dated cheques of periodic investment. This disciplined approach to investing has following advantages:
Benefit of compounding:
There is always a "good reason for not investing, but there is actually an even better reason to start investing right away. In fact, starting sooner rather than later is one of the best investment decisions you can make. The key to building wealth is to start investing early and to keep investing regularly. These regular amounts of savings no matter however small they may be shall possibly go a long way into creating a substantial amount of wealth over a long-term.
Rupee Cost Averaging Investing:
It would be simple if you could always pick the best time to buy and sell. However, timing the market in this way is difficult. A better approach for most investors is Rupee Cost Averaging. With rupee costs averaging, you dont have to worry about where share prices or interest rates are headed. You simply invest a set amount of money on a regular basis over a long period of time. This approach over a long-term can help turn the odds in your favor. The idea is that you buy less when the market is up, and more when it is down - automatically.
Convenience:
One does not have to take out time from one’s busy schedule to make his investments. One has to just submit cheque with a simple enrollment form and one can relax. The mutual fund will deposit the cheque on the requested date and credit the units to one’s account and will send the confirmation for the same. Every year Mutual Fund will give an account statement showing the amount of investments made at various time, total number of units held, the average cost of each unit and the market value of the investment.
Systematic Withdrawal Plan (SWP):
As opposed to the Systematic Investment Plan, the Systematic Withdrawal Plan allows the investor the facility to withdraw a pre-determined amount/units from his fund at a pre-determined interval. The investor’s units will be redeemed at the existing NAV as on that day.This is a very good option while in retirement
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