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- Herausgeber: BookRix
- Kategorie: Fachliteratur
- Sprache: Englisch
In this book we explain how through mutual fund we can invest in capital market instruments such as shares, debentures and other securities. It works in a different manner as compared to other savings organizations such as banks, national savings, post office, non banking financial companies etc. As most if not all capital market instruments have an element of risk it is very essential that the investors have a clear understanding of how a mutual fund operates and what are its advantages and limitations. This understanding has to be created in the investors by the distributors engaged in the marketing of mutual fund products. The distributors should also be knowledgeable enough to answer fundamental and basic questions that will be raised by the investor. It is thus essential that those engaged in marketing of Mutual Funds such as individual agents, distributor companies, bank executives and others have a comprehensive, clear and correct understanding of the concept and working of Mutual Funds as well as essential operational and technical details.
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Veröffentlichungsjahr: 2023
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Investing in Mutual Funds
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About the book
In this book we explain how through mutual fund we can invest in capital market instruments such as shares, debentures and other securities. It works in a different manner as compared to other savings organizations such as banks, national savings, post office, non banking financial companies etc.
As most if not all capital market instruments have an element of risk it is very essential that the investors have a clear understanding of how a mutual fund operates and what are its advantages and limitations. This understanding has to be created in the investors by the distributors engaged in the marketing of mutual fund products.
The distributors should also be knowledgeable enough to answer fundamental and basic questions that will be raised by the investor. It is thus essential that those engaged in marketing of Mutual Funds such as individual agents, distributor companies, bank executives and others have a comprehensive, clear and correct understanding of the concept and working of Mutual Funds as well as essential operational and technical details.
Author
Contents
Concept and Role of Mutual Funds in India
Advantages of Mutual Funds
Evolution of Mutual Funds in India
Types of Funds
Fund Structure and Constituents
Legal Structure
Other Fund Constituents
Fund Mergers and Take Over’s
Legal and Regulatory Environment
Rule of Regulators in India
Investors Rights and Obligations
Offer Document
Introduction
Contents of the Offer Document
Key Information Memorandum
Fund Distribution and Sales Practices
Who Can Invest
Distribution Channels
Sales Practices
Accounting, Valuation and Taxation
Accounting
Valuation of Scheme Portfolios
Taxation
Investor Services
Applying for and Redeeming Mutual Fund Units
Investment Plans
Investment Management
Equity Portfolio Management
Debt Portfolio Management
Investment Policy and Restrictions
Measuring and Evaluating Mutual Fund Performance
Measuring Mutual Fund Performance
Evaluating Fund Performance
Tracking Fund Performance
Business Ethics for Mutual Funds
Understanding Business Ethics
Fund Regulators and Business Ethics
Helping Investors with Financial Planning
The Concept of Financial Planning for the Investors
Asset Allocation - The Strategic Tool
Helping Investors Understand Risk in Fund Investing
Awareness of Risks in Mutual Fund Investing
Developing a Model Portfolio
Concept and role of mutual funds
In a Mutual Fund many investors contribute to form a common pool of money. This pool of money is invested in accordance with a stated objective. The ownership of the fund is thus joint or mutual; the fund belongs to all investors. A single investor’s ownership of the fund is in the same proportion as the amount of the contribution made by him bears to the total amount of the fund.
A mutual fund uses the money collected from investors to buy those assets which are specifically permitted by it’s stated investment objective. Thus a growth fund would buy mainly equity assets – ordinary shares, preference shares, warrants etc. An income fund would mainly buy debt instruments such as debentures and bonds. The fund assets are owned by the investors in the same proportion as their contribution bears to the total contributions of all investors put together.
Advantages of Mutual Funds
(i) Portfolio Diversification:
Mutual fund normally invests in a well-diversified portfolio of securities. Each investor in a fund is a part owner of all of the fund’s assets. This enables him to hold a diversified investment portfolio.
(ii) Professional Management:
An investor can avail the benefits from the professional management skills brought in by the fund in the management of the investor’s portfolio. The investment management skills along with needed research into available investment options ensure a much better return than what an investor can manage on its own
(iii) Reduction or Diversification of Risk:
Investor in a mutual fund acquires a diversified portfolio. Diversification reduces the risk of loss as compared to investing directly in one or two shares or debentures or other instruments. While investing in the pool of funds with other investors any loss on one or two securities is also shared with other investors.
(iv) Reduction of Transaction Costs:
A direct investor bears all the costs of investing such as brokerage or custody of securities. When going through a fund he has the benefit of economies of scale, the funds pay lesser costs because of larger volumes and the benefit is passed on to it’s investors.
(v) Liquidity:
Investment in a Mutual Fund is more liquid. An investor can liquidate the investments by selling the units to the fund of it’s an open-end fund or by selling the units in the stock market if the fund is a close-end fund.
(vi) Convenience and Flexibility:
Within the same fund family, investors can easily transfer or switch their holdings from one scheme to another. Investors can buy or sell their units through internet or email. Investors can also get updated market information from the funds.
(vii) Safety:
Mutual fund industry is well regulated all funds are registered with SEBI which lays down rules to protect the investors. Thus investors benefit from the safety of a regulated investment environment.
Registration of Mutual Fund:
An application for registration of a mutual fund shall be made to the Board in Form A by the sponsor.
Every application for registration under regulation 3 shall be accompanied by non refundable application fee as specified in the Second Schedule.
An application which is not complete in all respects shall be liable to be rejected provided that before rejecting any such application the applicant shall be given an opportunity to complete such formalities within such time as may be specified by the Board.
The Board may require the sponsor to furnish such further information or clarification as may be required by it.
For the purpose of grant of a certificate of registration the applicant has to fulfill the following:
a) The sponsor should have a sound track record and general reputation of fairness and integrity in all his business transactions. For this purpose “sound track record” shall mean:
i) The sponsor should be carrying on business in financial services for a period of mot less than five years.
ii) The net worth is positive in all the immediately preceding five years.
iii) The net worth in the immediately preceding year is more than the capital contribution of the sponsor in the Asset Management Company (AMC)
iv) The sponsor has profits after providing for depreciation, interest and tax in three out of the immediately preceding five years including the fifth year.
b) In the case of an existing mutual fund such fund is in the form of a trust and the trust deed has been approved by the Board.
