Mutual
Funds
Mutual Funds: These are funds operated by an
investment company which raises money from the public and invests in a group of
assets (shares, debentures, etc.) in accordance with a stated set of
objectives. It is a substitute for those who are unable to invest directly in
equities or debt because of resource, time or knowledge constraints.
Plans: - Direct & Regular
Regular Plan: - In this plan Mutual funds house give
the Commission to the broker/agent as a distribution fee. This means some of
the part of your investment or income goes In Commission and you get lesser
benefits.
Direct Plan: - No fees/commission is paid. In this plan
you get all the benefits or Share of your Investment.
Growth
& Dividend
Dividend: – In this plan Investor gets a portion of
Profit monthly, quarterly, half yearly or yearly that is called Dividend.
Growth: - Profits are re-invested in growth option. Means
the all the profit earned by Mutual funds house by investing in Different investment
option are being Reinvested in the available investment options. So that the Investor
could get a large amount of Money at Exit Time.
Open Ended &
Closed Ended
Open Ended:
- Open ended funds are always open to investment and redemptions(withdrawal).
Key Points: -
v High
liquidity – you can buy or sell units at any time excepting the units of ELSS funds
as they are locked-in for 3 years from the date of investment. This is the
biggest advantage if you compare open ended funds vs close ended.
v You
can invest in lump sum as well as through SIPs. In fact, you can make any
number of purchases in the fund.
v You
can invest in open ended funds by checking the track record of the schemes
performances in which you want to invest.
v Through
SIPs you can take benefit of rupee cost averaging of the unit price. In case of
lump sum also, you can invest based on markets level. You can add more units
when the markets are down.
v You
can start investing with as low as Rs 500.
Closed Ended:
- A closed ended mutual fund scheme is where your investment is
locked in for a specified period of time.
Key Points: -
v No
liquidity during the lock-in period. Redemption proceeds received only after
the mandatory lock-in period is over
v You
can invest only during the new fund offer (NFO). You cannot invest through SIPs
v Since
you can buy close ended funds only during their NFO period, no track record is
available
v Generally,
Rs 5,000 is the minimum investment amount for investing in a close ended fund
NFO.
v No
averaging facility in these funds as they do not accept any investments post
the NFO period is over.
Types of Mutual funds
There are several types of Mutual funds these are
narrated below
Debt Funds:
- In this investment is made in securities which generate fixed income
like treasury bills, corporate bonds, commercial papers, government securities,
and many other money instruments for Interest.
Equity Funds: - These
are mutual fund schemes which invests their assets in stocks of different
companies.
Hybrid Funds: -
These are mutual fund schemes which invest in more than one asset class i.e.,
equity, debt and other asset classes depending on the investment objective of
the scheme. These funds invest in a mix of different asset classes to diversify
the portfolio with an aim to minimize the risk involved. Hybrid funds have the
potential to generate relatively better returns than debt funds while being less
risky than equity funds.
ELSS: - (Equity
link Savings Schemes) ELSS funds are equity funds that invest a
major portion of their corpus into equity or equity-related instruments. ELSS
funds are also called tax saving schemes. It allows an individual or HUF a
deduction from total income of up to Rs. 1.5 lacs under Sec 80C of Income Tax
Act 1961.
Thus, if an investor was to invest Rs. 50,000 in an
ELSS, then this amount would be deducted from the total taxable income, thus
reducing her tax burden.
Some Top Performing Funds
Large Cap
Canara Robeco
Bluechip Equity Fund - Direct Plan - Growth
Mirae Asset
Large Cap Fund - Direct Plan - Growth
Mid Cap
DSP Midcap Fund
- Direct Plan - Growth
Axis Midcap Fund
- Direct Plan - Growth
Kotak Emerging
Equity Fund - Direct Plan - Growth
Invesco India
Mid Cap Fund - Direct Plan - Growth
ELSS -
Equity
link Savings Schemes
Bank of India Tax Advantage Direct-Growth
Canara Robeco
Equity Tax Saver Fund - Direct Plan - Growth
Kotak Tax Saver
Fund - Direct Plan - Growth
SBI Magnum
Tax Gain Scheme - Direct Plan - Growth
Mutual fund investments are subject to market risks, read all scheme related documents carefully.
