Of all investment options, mutual funds are routed to be the best tool for wealth creation over the long term. They are of several types, and the risk varies with the kind of asset classes these funds invest in. As the name suggests, a mutual fund is a fund that is created when a large number of investors put in their money, and is managed by professionally qualified persons with experience in investing in different asset classes - shares, bonds, money market instruments like call money, and other assets such as gold and property. Their names usually give a good idea about what type of asset class a fund, also called a scheme, will invest in. For example , a diversified equity fund will invest in a large number of stocks, while a gilt fund will invest in government securities while a pharma fund will mainly invest in stocks of companies from the pharmaceutical and related industries.
Mutual funds are compulsorily registered with the Securities and Exchange Board of India ( Sebi), which also acts as the first wall of the defence for all investors in these funds. For those who do not understand how mutual funds operate but are willing to invest, the move by Sebi is seen as a big relief.
Each mutual fund is run a group of qualified people who form a company, called an asset management company (AMC) and the operations of the AMC are under the guidance of another group of people, called trustees. Both, the people in the AMC as well as the trustees, have a fiduciary responsibility because these are the people who are entrusted with the task of managing the hard-earned money of people who do not understand much about managing money.
A fund house or a distributor working for the fund house ( which could be an individual, a company or even a bank) are qualified too sell mutual funds. Once the fund house allots the `units' of the MF to the investor at a price that is fixed through a process approved by Sebi which is based on the net asset value (NAV). In simple terms, NAV is the total value of investment in a scheme divided by the total number of units issued to investors in the same scheme. In most mutual fund schemes, NAV's are computed and published on a daily basis. However, when a fund house is lauching a scheme for the first time, the units are sold at Rs 10 each.
Mutual funds are compulsorily registered with the Securities and Exchange Board of India ( Sebi), which also acts as the first wall of the defence for all investors in these funds. For those who do not understand how mutual funds operate but are willing to invest, the move by Sebi is seen as a big relief.
Each mutual fund is run a group of qualified people who form a company, called an asset management company (AMC) and the operations of the AMC are under the guidance of another group of people, called trustees. Both, the people in the AMC as well as the trustees, have a fiduciary responsibility because these are the people who are entrusted with the task of managing the hard-earned money of people who do not understand much about managing money.
A fund house or a distributor working for the fund house ( which could be an individual, a company or even a bank) are qualified too sell mutual funds. Once the fund house allots the `units' of the MF to the investor at a price that is fixed through a process approved by Sebi which is based on the net asset value (NAV). In simple terms, NAV is the total value of investment in a scheme divided by the total number of units issued to investors in the same scheme. In most mutual fund schemes, NAV's are computed and published on a daily basis. However, when a fund house is lauching a scheme for the first time, the units are sold at Rs 10 each.
No comments:
Post a Comment