Introduction

  • Mutual Fund is an investment tool, where funds are collected from different interested investors and are invested in securities such as stocks, bonds, money market instruments and such assets.

  • In India, mutual funds are generally handled by fund managers, also referred to as the portfolio managers. They are responsible for investing the fund’s capital and produce capital gains and income for the fund’s investors. They also maintain a structured portfolio to match the investment objectives.

  • Here at Indian wealth management, we offer a number of ways to invest in mutual funds that are professionally managed by well-known and respected fund managers.

  • We offer mutual funds ranging from debt to equity. We establish our selection on first-hand, in-depth research taking into consideration various factors including investment philosophy, portfolio quality, risk-adjusted returns and market

TYPES OF MUTUAL FUNDS

  • 1. Equity Funds

  • Equity funds aim to provide capital growth by investing in the shares of individual companies.

  • 2. Debt or Income Funds

  • The aim of debt or income funds is to provide you with a steady income. These funds generally invest in securities such as bonds, corporate debentures, government securities (gilts) and money market instruments.

  • 3. Balanced Funds

  • The aim of balanced funds is to provide both growth and regular income through investing both in equities and fixed income securities in the proportion indicated in their offer documents.

  • 4. Liquid Funds

  • It is an appealing alternative to bank deposits because they aim to provide liquidity, capital preservation and slightly higher interest rates than bank accounts.

  • 5. Index Funds

  • Index funds are passively managed funds i.e. the fund manager attempts to mirror the performance of a benchmark index like the BSE Sensex or the S&P CNX Nifty, by being invested in the same stocks.

  • 6. Diversified Funds

  • These funds provides the benefit of diversified investment in companies across all sectors and markets.

  • 7. Sector Funds

  • Here the investments are done primarily in equity shares of companies of a particular business sector or industry.




BENEFITS OF MUTUAL FUNDS

  • 1. Professional Financial Experts

  • Every mutual fund scheme has a well-defined objective and behind every scheme, there is a dedicated team of financial experts working in tandem with specialized investment research team. These experts diligently and judiciously study companies, their products and performance, and after thorough analysis, they decide on the best investment option most aptly suited to achieve the scheme’s objective as well as investor’s financial goals. So, our clients have to sit back and not be concerned in regards to the knowledge and understanding of managing their investments.

  • 2. Diversifying Risk

  • It plays a very big part in the success of any portfolio. Mutual funds invest in a broad range of securities. This limits investment risk by reducing the effect of a possible decline in the value of any one security. Mutual fund unit-holders can benefit from diversification techniques usually available only to investors wealthy enough to buy significant positions in a wide variety of securities.

  • 3. Minimizing Costs

  • Compared to direct investment in the share market, making investments through mutual funds is a less expensive affair that helps minimize an investor’s overall cost of investment. Through mutual funds, the economy of scale tips in the investor’s favour as he will enjoy special benefits in terms of brokerage, custodial fees, etc.

  • 4. Liquidity

  • You can encash your money from a mutual fund on immediate basis when compared with other forms of savings like the Public Provident Fund or National Savings Scheme. You can withdraw or redeem money at the Net Asset Value related prices in the open-end schemes. In closed-end schemes, lock in period is mentioned, investor cannot redeem his investment until that period.

  • 5. Variety of Investment

  • There is no shortage of variety when investing in mutual funds. There are funds that focus on blue-chip stocks, technology stocks, bonds or a mix of stocks and bonds and with due assistance from a financial expert, the investor can choose a scheme that aptly fits his requirements, and helps him achieve maximum profitability.

  • 6. Investor Safety

  • Registration of Mutual Funds with SEBI is mandatory. With investor interest at the helm, SEBI has laid down strict regulations to safeguard investors against possible frauds, and every company issuing or dealing in Mutual Funds must abide by them.

  • 7. Rate of Return

  • The return potential of medium to long term Mutual Funds multiplies manifold, resulting in greater profitability for investors in the long-term.

  • 8. Transparency

  • Mutual Funds are the most transparent form of investment. Investors will receive detailed information and timely updates about the nature of investments made, fund manager’s investment strategy behind the investments, the exact amount invested in each type of security, etc.

  • 9. Convenience

  • Mutual Funds facilitate easy and disciplined investment as well as ensure easy withdrawal of funds as per investor’s convenience.

  • 10. Choice of Investment

  • There are different types of Mutual Funds across varied sectors, and with due assistance from a financial expert, the investor can choose a scheme that aptly fits his requirements, and helps him achieve maximum profitability.

TYPES OF RISK

  • 1. Market Risk

  • At times, the prices or yields of all the securities in a particular market rise or fall due to broad outside influences. When this happens, the stock prices of both an outstanding, highly profitable company and a fledgling corporation may be affected. This change in price is due to market risk.

  • 2. Inflation Risk

  • Sometimes, it is referred to as loss of purchasing power. Whenever the rate of inflation exceeds the earnings on your investment, you run the risk that you’ll actually be able to buy less, not more.

  • 3. Credit Risk

  • It shows how stable is the company or entity to which you lend your money when you invest? How certain are you that it will be able to pay the interest you are promised or repay your principal when the investment matures?

  • 4. Interest Rate Risk

  • Changing interest rates affect both equities and bonds in many ways. Bond prices are influenced by movements in the interest rates in the financial system. Interest rate movements in the Indian debt markets can be volatile leading to the possibility of large price movements up or down in debt and money market securities and thereby to possibly large movements in the NAV.

  • 5. Investment Risk

  • In the sectoral fund schemes, investments will be predominantly in equities of selected companies in the particular sectors. Accordingly, the NAV of the schemes are linked to the equity performance of such companies and may be more volatile than a more diversified portfolio of equities

  • 6. Liquidity Risk

  • Thinly traded securities carry the danger of not being easily saleable at or near their real values. The fund manager may, therefore, be unable to quickly sell an illiquid bond and this might affect the price of the fund unfavorably. Liquidity risk is a characteristic of the Indian fixed income market.

  • Changes in the Government Policy

  • Changes in Government policy especially in regard to the tax benefits may impact the business prospects of the companies leading to an impact on the investments made by the fund.

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