ReshmaVK

MUTUAL FUNDS

Introduction
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A Mutual Fund is a trust that pools the savings of a number of investors who share a common investment objective

A mutual fund can make money from its securities in two ways: 1)A security can pay dividends or interest to the fund 2) a security can rise in value

Types of mutual funds

Type of Mutual Fund Schemes Structure Open Ended Funds Close Ended Funds Interval Funds Investment Objective Special Schemes

Growth Funds Income Funds Balanced Funds Money Market Funds

Industry Specific Schemes Index Schemes Sectoral Schemes

Growth funds
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Invest primarily in common shares (equities) , but may hold other assets as well. The goal is typically long-term growth because the value of the assets held increases over time. Some growth funds focus on large blue-chip companies, while others invest in smaller or riskier companies. Performance will be affected by the success or failure of specific investments and by the performance of the stock markets generally.

Fixed Income Funds:

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Invest in debt securities like bonds, debentures and mortgages that pay regular interest, or in corporate preferred shares that pay regular dividends. The goal, typically, is to provide investors with a regular income stream with low risk.

Balanced Funds:
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Invest in a balanced portfolio of equities, debt securities and money market instruments with the objective of providing reasonable returns with low to moderate risk

Money Market Funds:

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Invest in short-term (less than one year to maturity) corporate and government debt securities such as treasury bills, bankers acceptances and corporate notes.

Index Funds:
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Invest in a portfolio of securities selected to represent a specified target index or benchmark such as the S&P/TSX Composite Index.

Sectorial scheme
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May invest primarily in a specific geographical area (e.g., Asia) or a specific industry (e.g., high technology companies).

Working of a Mutual Fund

INVESTORS Passed back to INVESTORS GET A BLEND OF LIQUIDITY RETURNS & SAFETY RETURNS
MUTUAL FUND LARGE CORPORATE SPECIALISTS MANAGE

Pool their money with

FUND MANAGEMENT

Generate PORTFOLIO YIELDS HIGH RETURN TO MFs SECURITIES

Invest in INVEST IN BALANCED PORTFOLIO

Parties involved in mutual funds

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Mutual Fund Manager: Establishes one or more mutual funds, markets them and oversees their general administration.

Portfolio Adviser: The professional money manager appointed by the Mutual Fund Manager to direct the fund s investments. y The Mutual Fund Manager also often acts as the Portfolio Adviser.
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Principal Distributor: Coordinates the sale of the fund to investors, either directly or through a network of registered dealers. Custodian: The bank or trust company appointed by the Mutual Fund Manager to hold all of the securities owned by the fund.

Transfer Agent and Registrar: The group responsible of maintaining a list of all investors in the fund.

Auditor: The independent accountants retained by the Mutual Fund Manager to audit each year, and report on the financial statements of the fund. Trustee: The entity that has title to the securities owned by the fund (when the fund is organized as a trust, instead of as a corporation) on behalf of the unit holders.

Why Invest in a Mutual Fund?

Diversification y Variety y Liquidity y Convenience y Protecting investors
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