Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
oTREASA LILIYA oANUSHA JOSE oMATHEW JOSEPH oKARTHIKA GOPINATH oVISHNU M.C oSIRAJ MEHABOOB
INTRODUCTION
A mutual fund is a company that brings together money from many people and invests it in stocks, bonds or other assets. The combined holdings of stocks, bonds or other assets the fund owns are known as its portfolio. Each investor in the fund owns shares, which represent a part of these holdings.
The modern mutual fund was first introduced in Belgium in 1822. This form of investment soon spread to Great Britain and France. Mutual funds became popular in the United States in the 1920s and continue to be popular since the 1930s, especially open-end mutual funds. Mutual funds experienced a period of tremendous growth after World War II, especially in the 1980s and 1990s.
UTI launched more innovative schemes in 1970s and 80s to suit the needs of different investors. It launched ULIP in 1971, six more schemes between 1981-84, Children's Gift Growth Fund and India Fund schemes etc
The management of the fund is generally assigned to be professionals who are well trained and have adequate experience in the field of investment. The investment decisions of these professionals are always backed by informed judgement and experience.
A mutual fund is able to command vast resources and hence it is possible for it to have an in depth study and carry out research team which constantly analyses the companies and the industries and recommends the fund to buy or sell a particular share. Thus investments are made purely on the basis of research.
Apart from dividends, interest and capital appreciation, investors also stand to get the benefit of tax concession. The MFs are themselves totally exempt from tax on all income on their investments.
Some mutual funds have permitted the investors to exchange their units from one scheme to another and this flexibility is a great boon to investors. Income units can be exchanged for growth units depending upon performance of the funds. One cannot derive such a flexibility in any other investments.
Even a very small investor can afford to invest in MFs. They provide an attractive and cost effective alternative to direct purchase of shares.
Mutual fund
A mutual fund is a type of professionallymanaged type collective investment scheme that pools money from many investors. The mutual fund will have a fund manager who is responsible for investing the gathered money into specific securities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions of the mutual fund and thus on investing becomes a shareholder or unit holder of the fund.
Fund manager
The person(s) responsible for implementing a fund's investing strategy and managing its portfolio trading activities. A fund can be managed by one person, by two people as comanagers and by a team of three or more people. Fund managers are paid a fee for their work, which is a percentage of the fund's average assets under management.
FACILITIES AVAILABLE TO INVESTORS Repurchase Facility Reissue Facility Roll Over Facility Lateral Shifting Facility
are!
Repurchase Facility
The units of closed ended schemes must be compulsorily listed in recognized stock exchanges. Such units can be sold or bought at market price. But, units of open ended scheme are not at all listed and hence they have to bought only from the fund. So, the fund reserves the right to buy back the units from its members. The process of buying back the units from the investors by the fund called repurchase facility. This is available in both scheme so as to provide liquidity to investors. The price fixed for this purpose is called repurchase price
Reissue Facility
In the case of open ended schemes, units can be bought only from the fund and not in the open market. The units bought from the investors are again reissued to those who are interested in purchasing it. The price fixed for this purpose is called re-issue price.
A mutual fund can be constituted either as a entity or a trust In India , UTI was set up as a corporation under an Act of parliament in1964
Indian banks operating Mutual funds had made a convincing plea before the Government to allow their mutual funds to constitute them as ASSET MANAGEMENT COMPANY..
Major players
Registers and transfer agents Advertiser Advisor / manager Trustees Custodian Major players
During April 1996, the mutual funds Department of SEBI has released an exhaustive study on MF industry called MF 2000. It suggests several reforms they are-: o It has been proposed that MF should broaden their areas of investment. Accordingly, there is a proposal to set up MF to invest in guilt edged securities or real estate.
o There is a proposal to do away with the restriction of maximum industry exposure of 15% for a MF scheme. o At present, a MF can hold at maximum of only 5% of equity of a company. It has been proposed that this limit be increased to 10%. o Similarly, it is proposed to remove the existing minimum limit of 10% of a MF investment(both debt and equity) in a single company.
o All closed-end MF should get used within 6 months from the date of allotment unless they offer a continuous re-purchase facility to their clients. o It has been [proposed that closed-ended MF scheme which offer monthly income or schemes which are targeted at any certain categories of investors like women need not get listed.
o The existing requirement of minimum initial corpus for both open-ended and closed-end schemes is likely to be remove. o Further, the requirement of refunding subscription in case of collection falling below 60% of the target collection is sought to be removed.
o There is a proposal to extend the lock in period of 60 days before redemption in the case of open-ended schemes to 6 months. o For the purpose of meeting the redemption requests alone, it has been suggested that MF be permitted to borrow upto10% of their net assets for a maximum period of 3 months only.
o The SEBI has laid down new norms that require MFs to pay an interest of 15%per annum for my delay beyond 10 working days in giving investors their repurchase amount.
SELECTION OF A FUND
Mutual funds are not magic institutions which can bring treasure to the millions of their investors within a short span of time. All funds are equal to start with.
But in due course of time, some excel the other.
It all depends upon the efficiency with which the fund is being managed by the professionals of the fund. Hence, the investor has to be very careful in selecting a fund.
b. Consistency of Performance : A mutual fund is always intended to give steady long term returns, and hence, the investor should measure the performance of a fund over a period of at least 3 years. Consistency in performance is a good indicator of its investment expertise.
c. Historical Background : The success of any fund depends upon the competence of the management, its integrity, periodicity and experience. A good historical record could be a better horse to bet on than new funds.
c. Cost of Operation : Mutual funds seek to do a better job of the investible funds at a lower cost than the individuals could do for themselves. Hence, the prospective investor should scrutinize the expense ratio of the fund and compare it with others. Higher the ratio, lower will be the actual returns to the investor.
d. Capacity for Innovation : An innovator will be always a successful man. It is quite natural that an investor will look for funds which are capable of introducing innovations in the financial market. e. Market Trends :-
A prudent investor must keep his eyes on the stock market index, interest rate and the inflation rate.
f. Investor Servicing : Most important factor prompt and efficient servicing. Services like quick response to investor queries, prompt despatch of unit certificates, quick transfer of units etc will go a long way in creating a lasting impression in the minds of investors.
g. Transparency of the Fund Management : In these days of investor awareness, it is very vital that the fund should disclose the complete details regarding the operation of the fund. It will go a long way in creating a lasting impression in the minds of the investors to patronise the fund forever.