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Mutual Funds |
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Mutual funds are actually investment schemes. It is collective in nature. Mutual funds are managed by professional individuals who pools money through various schemes. The professionally qualified people invest the money of different investors in bonds, stocks, money markets and other securities. A particular scheme of mutual fund is managed by a fund manager. A fund manager is also known as the portfolio manager. A fund manager invests the money on behalf of the investor. He or she invests in different investment instruments and the profit that is made after the investment is distributed equally among the investors.
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The value of particular share of a mutual fund is known as net asset value or NAV. The value is calculated on a daily basis.
Types of mutual funds:
Mutual fund can be broadly divided into two categories – one ended fund and closed ended fund. A open ended fund is such a scheme of mutual fund where the investor can invest and redeem the amount any time he or she wishes to. But a closed ended fund is such a fund which does not allow the investors to withdraw the amount any time he or she wants. The investor can redeem the invested amount after a specified time.
On the basis of investment style, a mutual fund can be divided into equity funds and debt funds. The returns which are given out by an equity fund are much higher than the returns given out by a debt fund. An equity fund invests 90% of its amount into stocks. Generally stocks are risky and give high returns. A debt fund invests in bonds and thus the risk attached to it much lower. However, the returns given out by these funds are much lower in comparison to the equity schemes. Another major difference between an equity fund and debt fund is that, the risk involved in an equity fund is much higher than that of a debt fund.
In terms of capitalization a fund can be divided into three categories – large cap fund, mid cap fund and a small cap.
Fund of funds or FoF is another type of mutual fund which comprises many funds. One of the major advantage of investing in a Fund of Funds scheme is that the management fees charged by these funds are much lower than a normal mutual fund scheme. This type of fund is specially suited for those investors who are incapable or not willing to ascertain asset allocation model on their own.
Various companies who have diversified their business in the field of mutual fund are Franklin Templeton, Fidelity, JM and others. Many banks also offer mutual fund schemes. Deutsche bank, ABN-Amro bank, Standard Chartered bank, ICICI prudential are some of the well known global banks which offers various mutual funds schemes. Many Indian banks like SBI, Bank of Baroda also offers mutual fund schemes. Major Indian companies which have participated in the mutual fund industry are Tata, Reliance, Birla and others.
For further information about Mutual Funds refer to our website www.shareshub.com
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