What and How Indian Mutual Fund

8/6/2019 What and How Indian Mutual Fund

http://slidepdf.com/reader/full/what-and-how-indian-mutual-fund 1/20

MUTUAL FUND:

CONCEPT OF MUTUAL FUNDSA mutual fund is a common pool of money into which investors place their contributions that areto be invested in accordance with a stated objective.

The ownership of the fund is thus joint or ³mutual´; the fund belongs to all investors. A

single investor¶s ownership of the fund is in the same proportion as the amount of thecontribution made by him or her bears to the total amount of the fund. Mutual Funds are trusts,which accept savings from investors and invest the same in diversified financial instruments in

terms of objectives set out in the trusts deed with the view to reduce the risk and maximize theincome and capital appreciation for distribution for the members.

A Mutual Fund is a corporation and the fund manager¶s interest is to professional manage thefunds provided by the investors and provide a return on them after deducting reasonable

management fees.

The objective sought to be achieved by Mutual Fund is to provide an opportunityfor lower income groups to acquire without much difficulty financial assets. They cater mainly to

the needs of the individual investor whose means are small and to manage investors portfolio in amanner that provides a regular income, growth, safety, liquidity and diversification

opportunities.



HISTORY OF MUTUAL FUNDS IN INDIA:

The mutual fund industry in India started in 1963 with the formation of Unit Trust

of India, at the initiative of the Government of India and Reserve Bank. The history of mutualfunds in India can be broadly divided into four distinct phases

FIRST PHASE -1964-87:

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set

up by the Reserve Bank of India and functioned under the Regulatory and administrative controlof the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial

Development Bank of India (IDBI) took over the regulatory and administrative control in place

of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTIhadRs.6,700 corers of assets under management.

SECOND PHASE - 1987-1993 (ENTRY OF PUBLIC SECTOR FUNDS):

1987 marked the entry of non- UTI, public sector mutual funds set up by public

sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporationof India(GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987

followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89),Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct

92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund inDecember 1990.At the end of 1993, the mutual fund industry had assets under management of

Rs.47,004crores.

THIRD PHASE -1993-2003 (ENTRY OFPR IVATE SECTOR FUNDS):

With the entry of private sector funds in 1993, a new era started in the Indian mutual

fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was theyear in which the first Mutual Fund Regulations came into being, under which all mutual funds,

except UTI were to be registered and governed.The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private

sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations weresubstituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The

industry now functions under the SEBI (Mutual Fund) Regulations 1996.The number of mutualfund houses went on increasing, with many foreign mutual funds setting up funds in India and



also the industry has witnessed several mergers and acquisitions. As at the end of January 2003,there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with

Rs.44,541 crores of assets under management was way ahead of other mutual funds.

FOURTH PHASE - SINCE FEBRUARY 2003:

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTIwas bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of

India with assets under management of Rs.29,835 crores as at the end of January 2003,representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The

Specified Undertaking of Unit Trust of India, functioning under an administrator and under therules framed by Government of India and does not come under the purview of the Mutual Fund

Regulations. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. Itis registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation

of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assetsunder management and with the setting up of a UTI Mutual Fund, conforming to the SEBI

Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth.

As at the end of September, 2004, there were 29 funds, which manage assets of

Rs.153108 corers under 421schemes.



*The graph indicates the growth of assets under management over the years.

GROWTH IN ASSETS UNDER MANAGEMENT

*(Source: www.amfiindia.com)



STRUCTURE OF MUTUAL FUNDThere are many entities involved and the diagram below illustrates the structure of mutual funds: -

SEBI

The regulation of mutual funds operating in India falls under the preview of authority of the ³ Securities and Exchange Board of India

(SEBI). Any person proposing to set up a mutual fund in India is required under the SEBI (Mutual Funds) Regulations, 1996 to be registered

with the SEBI.

Sponsor

The sponsor should contribute at least 40% to the net worth of the AMC. However, if any person holds 40% or more of the net worth of

an AMC shall be deemed to be a sponsor and will be required to fulfill the eligibility criteria in the Mutual Fund Regulations. The sponsor or any

of its directors or the principal officer employed by the mutual fund should not be guilty of fraud or guilty of any economic offence.Trustees

The mutual fund is required to have an independent Board of Trustees, i.e. two third of the trustees should be independent persons who

are not associated with the sponsors in any manner. An AMC or any of its officers or employees are not eligible to act as a trustee of any



mutual fund. The trustees are responsible for - inter alia ± ensuring that the AMC has all its systems in place, all key personnel, auditors,

registrar etc. have been appointed prior to the launch of any scheme.Asset Management Company

The sponsors or the trustees are required to appoint an AMC to manage the assets of the mutual fund. Under the mutual fund

regulations, the applicant must satisfy certain eligibility criteria in order to qualify to register with SEBI as an AMC.1. The sponsor must have at least 40% stake in the AMC.

2. The chairman of the AMC is not a trustee of any mutual fund.3. The AMC should have and must at all times maintain a minimum net worth of Cr.100 million.4. The director of the AMC should be a person having adequate professionalexperience.5.The board of directors of such AMC has at least 50% directors who are notassociate of or associated in any manner with the sponsor or any of itssubsidiaries or the trustees.

The Transfer AgentsThe transfer agent is contracted by the AMC and is responsible for maintaining theregister of investors / unit holders and every day settlements of purchases and redemption of units. The role of a transfer agent is

to collect data from distributors relating to daily purchases and redemption of units.

Custodian

The mutual fund is required, under the Mutual Fund Regulations, to appoint a custodian to carry out the custodial services for the

schemes of the fund. Only institutions with substantial organizational strength, service capability in terms of computerization and other

infrastructure facilities are approved to act as custodians. The custodian must be totally delinked from the AMC and must be registered with

SEBI.

Unit HoldersThey are the parties to whom the mutual fund is sold. They are ultimate beneficiary

of the income earned by the mutual funds.

UNDERSTANDING MUTUAL FUND:

Mutual fund is a trust that pools money from a group of investors (sharing common financial goals) and



invest the money thus collected into asset classes that match the stated investment objectives of thescheme. Since the stated investment objectives of a mutual fund scheme generally forms the basis for aninvestor's decision to contribute money to the pool, a mutual fund can not deviate from its statedobjectives at any point of time.

Every Mutual Fund is managed by a fund manager, who using his investment management skills andnecessary research works ensures much better return than what an investor can manage on his own.The capital appreciation and other incomes earned from these investments are passed on to theinvestors (also known as unit holders) in proportion of the number of units they own.

When an investor subscribes for the units of a mutual fund, he becomes part owner of theassets of the fund in the same proportion as his contribution amount put up with the corpus (thetotal amount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or aunit holder.

Any change in the value of the investments made into capital market instruments (such asshares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is definedas the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is

calculated by dividing the market value of scheme's assets by the total number of units issuedto the investors.



BROAD TYPES MUTUAL FUND TYPES

1. Equity FundsEquity funds are considered to be the more risky funds as compared to other fund types, butthey also provide higher returns than other funds. It is advisable that an investor looking toinvest in an equity fund should invest for long term i.e. for 3 years or more. There are differenttypes of equity funds each falling into different risk bracket. In the order of decreasing risk level,there are following types of equity funds:

a. Aggressive Growth Funds - In Aggressive Growth Funds, fund managers aspire for maximum capital appreciation and invest in less researched shares of speculativenature. Because of these speculative investments Aggressive Growth Funds becomemore volatile and thus, are prone to higher risk than other equity funds.

b. Growth Funds - Growth Funds also invest for capital appreciation (with time horizon of

3 to 5 years) but they are different from Aggressive Growth Funds in the sense that theyinvest in companies that are expected to outperform the market in the future. Withoutentirely adopting speculative strategies, Growth Funds invest in those companies thatare expected to post above average earnings in the future.

c. Speciality Funds - Speciality Funds have stated criteria for investments and their portfolio comprises of only those companies that meet their criteria. Criteria for somespeciality funds could be to invest/not to invest in particular regions/companies.



Speciality funds are concentrated and thus, are comparatively riskier than diversifiedfunds.. There are following types of speciality funds:

i. Sector Funds: Speciality Funds have stated criteria for investments and their portfolio comprises of only those companies that meet their criteria. Criteria for some speciality funds could be to invest/not to invest in particular regions/companies. Speciality funds are concentrated and thus, are

comparatively riskier than diversified funds.. There are following types of speciality funds:

ii. Foreign Securities Funds: Foreign Securities Equity Funds have the option toinvest in one or more foreign companies. Foreign securities funds achieveinternational diversification and hence they are less risky than sector funds.However, foreign securities funds are exposed to foreign exchange rate risk andcountry risk.

iii. Mid-Cap or Small-Cap Funds: Funds that invest in companies having lower market capitalization than large capitalization companies are called Mid-Cap or Small-Cap Funds. Market capitalization of Mid-Cap companies is less than thatof big, blue chip companies (less than Rs. 2500 crores but more than Rs. 500crores) and Small-Cap companies have market capitalization of less than Rs.

500 crores. Market Capitalization of a company can be calculated by multiplyingthe market price of the company's share by the total number of its outstandingshares in the market. The shares of Mid-Cap or Small-Cap Companies are not asliquid as of Large-Cap Companies which gives rise to volatility in share prices of these companies and consequently, investment gets risky.

iv. Option Income Funds*: While not yet available in India, Option Income Fundswrite options on a large fraction of their portfolio. Proper use of options can helpto reduce volatility, which is otherwise considered as a risky instrument. Thesefunds invest in big, high dividend yielding companies, and then sell optionsagainst their stock positions, which generate stable income for investors.

d. Diversified Equity Funds - Except for a small portion of investment in liquid moneymarket, diversified equity funds invest mainly in equities without any concentration on a

particular sector(s). These funds are well diversified and reduce sector-specific or company-specific risk. However, like all other funds diversified equity funds too areexposed to equity market risk. One prominent type of diversified equity fund in India isEquity Linked Savings Schemes (ELSS). As per the mandate, a minimum of 90% of investments by ELSS should be in equities at all times. ELSS investors are eligible toclaim deduction from taxable income (up to Rs 1 lakh) at the time of filing the income taxreturn. ELSS usually has a lock-in period and in case of any redemption by the investor before the expiry of the lock-in period makes him liable to pay income tax on suchincome(s) for which he may have received any tax exemption(s) in the past.

e. Equity Index Funds - Equity Index Funds have the objective to match the performanceof a specific stock market index. The portfolio of these funds comprises of the samecompanies that form the index and is constituted in the same proportion as the index.

Equity index funds that follow broad indices (like S&P CNX Nifty, Sensex) are less riskythan equity index funds that follow narrow sectoral indices (like BSEBANKEX or CNXBank Index etc). Narrow indices are less diversified and therefore, are more risky.

f. Value Funds - Value Funds invest in those companies that have sound fundamentalsand whose share prices are currently under-valued. The portfolio of these fundscomprises of shares that are trading at a low Price to Earning Ratio (Market Price per Share / Earning per Share) and a low Market to Book Value (Fundamental Value) Ratio.Value Funds may select companies from diversified sectors and are exposed to lower risk level as compared to growth funds or speciality funds. Value stocks are generally



from cyclical industries (such as cement, steel, sugar etc.) which make them volatile inthe short-term. Therefore, it is advisable to invest in Value funds with a long-term timehorizon as risk in the long term, to a large extent, is reduced.

g. Equity Income or Dividend Yield Funds - The objective of Equity Income or DividendYield Equity Funds is to generate high recurring income and steady capital appreciationfor investors by investing in those companies which issue high dividends (such as Power

or Utility companies whose share prices fluctuate comparatively lesser than other companies' share prices). Equity Income or Dividend Yield Equity Funds are generallyexposed to the lowest risk level as compared to other equity funds.

2. Debt / Income Funds Funds that invest in medium to long-term debt instruments issued by private companies, banks,financial institutions, governments and other entities belonging to various sectors (likeinfrastructure companies etc.) are known as Debt / Income Funds. Debt funds are low riskprofile funds that seek to generate fixed current income (and not capital appreciation) toinvestors. In order to ensure regular income to investors, debt (or income) funds distribute largefraction of their surplus to investors. Although debt securities are generally less risky thanequities, they are subject to credit risk (risk of default) by the issuer at the time of interest or

principal payment. To minimize the risk of default, debt funds usually invest in securities fromissuers who are rated by credit rating agencies and are considered to be of "Investment Grade".Debt funds that target high returns are more risky. Based on different investment objectives,there can be following types of debt funds:

a. Diversified Debt Funds - Debt funds that invest in all securities issued by entitiesbelonging to all sectors of the market are known as diversified debt funds. The bestfeature of diversified debt funds is that investments are properly diversified into allsectors which results in risk reduction. Any loss incurred, on account of default by a debtissuer, is shared by all investors which further reduces risk for an individual investor.

b. Focused Debt Funds* - Debt funds that invest in all securities issued by entitiesbelonging to all sectors of the market are known as diversified debt funds. The best

feature of diversified debt funds is that investments are properly diversified into allsectors which results in risk reduction. Any loss incurred, on account of default by a debtissuer, is shared by all investors which further reduces risk for an individual investor.

c. High Yield Debt funds - As we now understand that risk of default is present in all debtfunds, and therefore, debt funds generally try to minimize the risk of default by investingin securities issued by only those borrowers who are considered to be of "investmentgrade". But, High Yield Debt Funds adopt a different strategy and prefer securitiesissued by those issuers who are considered to be of "below investment grade". Themotive behind adopting this sort of risky strategy is to earn higher interest returns fromthese issuers. These funds are more volatile and bear higher default risk, although theymay earn at times higher returns for investors.

d. Assured Return Funds - Although it is not necessary that a fund will meet its objectives

or provide assured returns to investors, but there can be funds that come with a lock-inperiod and offer assurance of annual returns to investors during the lock-in period. Anyshortfall in returns is suffered by the sponsors or the Asset Management Companies(AMCs). These funds are generally debt funds and provide investors with a low-riskinvestment opportunity. However, the security of investments depends upon the networth of the guarantor (whose name is specified in advance on the offer document). Tosafeguard the interests of investors, SEBI permits only those funds to offer assuredreturn schemes whose sponsors have adequate net-worth to guarantee returns in thefuture. In the past, UTI had offered assured return schemes (i.e. Monthly Income Plans



of UTI) that assured specified returns to investors in the future. UTI was not able to fulfillits promises and faced large shortfalls in returns. Eventually, government had tointervene and took over UTI's payment obligations on itself. Currently, no AMC in Indiaoffers assured return schemes to investors, though possible.

e. Fixed Term Plan Series - Fixed Term Plan Series usually are closed-end schemeshaving short term maturity period (of less than one year) that offer a series of plans and

issue units to investors at regular intervals. Unlike closed-end funds, fixed term plans arenot listed on the exchanges. Fixed term plan series usually invest in debt / incomeschemes and target short-term investors. The objective of fixed term plan schemes is togratify investors by generating some expected returns in a short period.

3. Gilt Funds Also known as Government Securities in India, Gilt Funds invest in government papers (nameddated securities) having medium to long term maturity period. Issued by the Government of India, these investments have little credit risk (risk of default) and provide safety of principal tothe investors. However, like all debt funds, gilt funds too are exposed to interest rate risk.Interest rates and prices of debt securities are inversely related and any change in the interestrates results in a change in the NAV of debt/gilt funds in an opposite direction.

4. Money Market / Liquid Funds Money market / liquid funds invest in short-term (maturing within one year) interest bearing debtinstruments. These securities are highly liquid and provide safety of investment, thus makingmoney market / liquid funds the safest investment option when compared with other mutual fundtypes. However, even money market / liquid funds are exposed to the interest rate risk. Thetypical investment options for liquid funds include Treasury Bills (issued by governments),Commercial papers (issued by companies) and Certificates of Deposit (issued by banks).

5. Hybrid Funds As the name suggests, hybrid funds are those funds whose portfolio includes a blend of equities, debts and money market securities. Hybrid funds have an equal proportion of debt and

equity in their portfolio. There are following types of hybrid funds in India:

a. Balanced Funds - The portfolio of balanced funds include assets like debt securities,convertible securities, and equity and preference shares held in a relatively equalproportion. The objectives of balanced funds are to reward investors with a regular income, moderate capital appreciation and at the same time minimizing the risk of capital erosion. Balanced funds are appropriate for conservative investors having a longterm investment horizon.

b. Growth-and-Income Funds - Funds that combine features of growth funds and incomefunds are known as Growth-and-Income Funds. These funds invest in companies havingpotential for capital appreciation and those known for issuing high dividends. The level of risks involved in these funds is lower than growth funds and higher than income funds.

c. Asset Allocation Funds - Mutual funds may invest in financial assets like equity, debt,money market or non-financial (physical) assets like real estate, commodities etc.. Assetallocation funds adopt a variable asset allocation strategy that allows fund managers toswitch over from one asset class to another at any time depending upon their outlook for specific markets. In other words, fund managers may switch over to equity if they expectequity market to provide good returns and switch over to debt if they expect debt marketto provide better returns. It should be noted that switching over from one asset class toanother is a decision taken by the fund manager on the basis of his own judgment and



understanding of specific markets, and therefore, the success of these funds dependsupon the skill of a fund manager in anticipating market trends.

6. Commodity Funds Those funds that focus on investing in different commodities (like metals, food grains, crude oiletc.) or commodity companies or commodity futures contracts are termed as Commodity Funds.

A commodity fund that invests in a single commodity or a group of commodities is a specializedcommodity fund and a commodity fund that invests in all available commodities is a diversifiedcommodity fund and bears less risk than a specialized commodity fund. "Precious Metals Fund"and Gold Funds (that invest in gold, gold futures or shares of gold mines) are commonexamples of commodity funds.

7. Real Estate Funds Funds that invest directly in real estate or lend to real estate developers or invest inshares/securitized assets of housing finance companies, are known as Specialized Real EstateFunds. The objective of these funds may be to generate regular income for investors or capitalappreciation.

8. Exchange Traded Funds (ETF) Exchange Traded Funds provide investors with combined benefits of a closed-end and an open-end mutual fund. Exchange Traded Funds follow stock market indices and are traded on stockexchanges like a single stock at index linked prices. The biggest advantage offered by thesefunds is that they offer diversification, flexibility of holding a single share (tradable at index linkedprices) at the same time. Recently introduced in India, these funds are quite popular abroad.

9. Fund of Funds Mutual funds that do not invest in financial or physical assets, but do invest in other mutual fundschemes offered by different AMCs, are known as Fund of Funds. Fund of Funds maintain aportfolio comprising of units of other mutual fund schemes, just like conventional mutual fundsmaintain a portfolio comprising of equity/debt/money market instruments or non financial assets.

Fund of Funds provide investors with an added advantage of diversifying into different mutualfund schemes with even a small amount of investment, which further helps in diversification of risks. However, the expenses of Fund of Funds are quite high on account of compoundingexpenses of investments into different mutual fund schemes.

* Funds not yet available in India

Risk Heirarchy of Different Mutual Funds Thus, different mutual fund schemes are exposed to different levels of risk and investors shouldknow the level of risks associated with these schemes before investing. The graphicalrepresentation hereunder provides a clearer picture of the relationship between mutual fundsand levels of risk associated with these funds:



SOME OF THE TERMS USED IN MUTUAL FUNDS

Net Asset Value (NAV) Net Asset Value is the market value of the assets of the scheme minus its liabilities. The perunit NAV is the net asset value of the scheme divided by the number of units outstanding onthe Valuation Date.

Sale Price : It is the price you pay when you invest in a scheme and is also called "OfferPrice". It may include a sales load.

R epurchase Price : - It is the price at which a Mutual Funds repurchases its units and itmay include a back-end load. This is also called Bid Price.

R edemption Price : It 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.

Sales Load / Front End Load : It is a charge collected by a scheme when it sells the units.Also called, µFront-end¶ load. Schemes which do not charge a load at the time of entry arecalled µNo Load¶ schemes.

R epurchase / µBack-end¶ Load :

It is a charge collected by a Mufual Funds when it buys back / Repurchases the units from



ADVANTAGES OF MUTUAL FUNDS:

If mutual funds are emerging as the favorite investment vehicle, it is because of the many

advantages they have over other forms and the avenues of investing, particularly for theinvestor who has limited resources available in terms of capital and the ability to carry outdetailed research and market monitoring. The following are the major advantages offered by

mutual funds to all investors:

Portfolio Diversification:

Each investor in the fund is a part owner of all the fund¶s assets, thus enabling him to hold

a diversified investment portfolio even with a small amount of investment that would otherwiserequire big capital.

Professional Management:

Even if an investor has a big amount of capital available to him, he benefits fromthe professional management skills brought in by the fund in the management of the

investor¶s portfolio.The investment management skills, along with the needed research into available investment

options, ensure a much better return than what an investor can manage on his own. Few investorshave the skill and resources of their own to succeed in today¶s fast moving, global and

sophisticated markets.

Reduction/Diversification Of Risk:

When an investor invests directly, all the risk of potential loss is his own, whether he placesa deposit with a company or a bank, or he buys a share or debenture on his own or in any other

from. While investing in the pool of funds with investors, the potential losses are also sharedwith other investors. The risk reduction is one of the most important benefits of a collective

investment vehicle like the mutual fund.Liquidity:

Often, investors hold shares or bonds they cannot directly, easily and quickly sell. When

they invest in the units of a fund, they can generally cash their investments any time, by sellingtheir units to the fund if open-ended, or selling them in the market if the fund is close-end.

Liquidity of investment is clearly a big benefit



Convenience And Flexibility:

Mutual fund management companies offer many investor services that a direct marketinvestor cannot get. Investors can easily transfer their holding from one scheme to the other; get

updated market information and so on.

Tax Benefits:

Any income distributed after March 31, 2002 will be subject to tax in the assessment of allUnit holders. However, as a measure of concession to Unit holders of open-ended equity-

oriented funds, income distributions for the year ending March 31, 2003, will be taxed at aconcessional rate of 10.5%.In case of Individuals and Hindu Undivided Families a deduction up

to Rs. 9,000 from the Total Income will be admissible in respect of income from investmentsspecified in Section 80L, including income from Units of the Mutual Fund. Units of the schemes

are not subject to Wealth-Tax and Gift-Tax.

Choice of Schemes:

Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.

Well Regulated:

All Mutual Funds are registered with SEBI and they function within the provisions of strict

regulations designed to protect the interests of investors. The operations of Mutual Funds areregularly monitored by SEBI.

Transparency:

You get regular information on the value of your investment in addition to disclosure onthespecific investments made by your scheme, the proportion invested in each class of assetsandthe fund manager's investment strategy and outlook.



DISADVANTAGES OF INVESTING THROUGH MUTUAL FUNDS:

No Control Over Costs:

An investor in a mutual fund has no control of the overall costs of investing. Theinvestor pays investment management fees as long as he remains with the fund, albeit in return

for the professional management and research. Fees are payable even if the value of hisinvestments is declining. A mutual fund investor also pays fund distribution costs, which he

would not incur indirect investing. However, this shortcoming only means that there is a cost toobtain the mutual fund services.

No Tailor-Made Portfolio:

Investors who invest on their own can build their own portfolios of shares and bonds and

other securities. Investing through fund means he delegates this decision to the fund managers.The very-high-net-worth individuals or large corporate investors may find this to be a constraint

in achieving their objectives. However, most mutual fund managers help investors overcome thisconstraint by offering families of funds- a large number of different schemes- within their own

management company. An investor can choose from different investment plans and constructsa portfolio to his choice.

Managing A Portfolio Of Funds:

Availability of a large number of funds can actually mean too much choice for the investor.

He may again need advice on how to select a fund to achieve his objectives, quite similar to thesituation when he has individual shares or bonds to select.

The Wisdom Of Professional Management:

That's right, this is not an advantage. The average mutual fund manager is no better at picking stocks than the average nonprofessional, but charges fees.

No Control:

Unlike picking your own individual stocks, a mutual fund puts you in the passenger seat of

somebody else's car



Dilution:

Mutual funds generally have such small holdings of so many different stocks thatinsanely

great performance by a fund's top holdings still doesn't make much of a difference in amutualfund's total performance.

Buried Costs:

Many mutual funds specialize in burying their costs and in hiring salesmen who do notmake

those costs clear to their clients.



BIBLIOGRAPHY

Websites:

y Search website, www.google.co.in

y Article base, Finance, Investing,www.articlebase.com

y Association of Mutual in India,www.amfiindia.com

y Business Maps of India, Mutual Fund, Performance,http://business.mapsofindia.com

y

Deccan herald, National, Detailed Story,www.deccanherald.com

y Domain-b, Markets, Mutual Fund,www.domain-b.com

y Economic Times, Personal Finance, Mutualfundnews,http://economictimes.indiatimes.com/Personal_Finance/Mutual_Funds/MF_Ne

ws/Mutual_ funds_assets_jump_4_pc_in_Dec_add_Rs_16300_cr/articleshow/3926747.cms

y Email wire, Home, News by company, RNCOS,www.emailwire.com

y

Finance Research,www.financeresearch.net

y Financial chronicle, My Money, Mutual Funds,www.mydigitalfc.com

y Find articles, businessserviceindustry,http://findarticles.com/p/articles/mi_m1TSD/is_1_6/ai_n25012619/pg_1?

tag=artBody;col1

y ITrust, Mutual Funds,www.itrust.in

y IBN Live, Markets,www.ibnlive.in.com

y India Finance and Investment Guide, Mutual Funds,http://finance.indiamart.com

y India Funds Research, Mutual Funds,www.indiafund.net

y Karvy, Mutual Funds, Articles,www.karvy.com

y Live mint, money matters,www.livemint.com



y Money control, mutual funds,www.moneycontrol.com

y Mutual funds India,www.mutualfundsindia.com

y Presentation on Evolution of India s mutual fund industry, A P

Kurien,www.amfiindia.com

y Reuters UK, News, Article,http://uk.reuters.com

y Sify, Business, Mutual funds,http://sify.com/finance/mutualfunds/

y SSRN papers,www.ssrn.com

What and How Indian Mutual Fund

Documents

Transcript of What and How Indian Mutual Fund