Why should you invest through Mutual Funds?
Mutual funds are like professional money managers, however a key factor in their favor is that they are more regulated and hence offer investors the ability to analyse and evaluate their track record. Secondly, investing is becoming more complex. As India started integrating with the world (with the start of the liberalization process), complex factors such as an increase in short-term US interest rates, the collapse of the Brazilian currency or default on its debt by the Russian government, have started having an impact on the Indian stock market. Mutual funds (whose fund managers are paid to understand these issues and whose asset Management Company invests in research) provide an option of investing without getting lost in the complexities.
Why should you invest through Mutual Funds?
Lastly, and most importantly, mutual funds provide risk diversification: Diversification of a portfolio is amongst the primary tenets of portfolio structuring (see The Need to Diversify). And a necessary one to reduce the level of risk assumed by the portfolio holder. Most of us are not necessarily well qualified to apply the theories of portfolio structuring to our holdings and hence would be better off leaving that to a professional. Mutual funds represent one such option.
What is the Procedure of investing in Mutual fund?
You need to fill up a simple form that captures your personal, bank and scheme details and hand it over to the mutual fund office or an agent of mutual fund.
What is the difference between an open-ended and close-ended scheme?
Open-ended Funds An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity
Closed-ended Funds A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period.
What is repurchase price?
Repurchase price is the price at which a close-ended scheme repurchases its units. Repurchase can either be at NAV or can have an exit load
What are the various types of funds available in the market?
Growth Funds The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a majority of their corpus in equities.
Income Funds The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and Government securities.
Money Market Funds The aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money.
What is the Procedure of Systematic Investment Plan?
You need to fill up an application form and a SIP form and provide post dated cheques .The SIP form captures details of the post-dated cheques that you issue
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