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Monday, July 16, 2018

IIBF JAIIB PPB : MUTUAL FUND


It is mechanism of pooling resources from public and investing in securities. Following are the features of Mutual Fund:
·         Units are sold to public
·         Investors are called unit holders
·         Money is kept in trust
·         Registration is required with SEBI  
·         Mutual Fund is set up in the form of trust with sponsored trustees, Asset Management Companies (AMCs) and custodians.
·         Sponsor is like a promoter of a company. AMC manages funds by making investment in various types of securities. Custodian holds securities in its custody
·         SEBI requires that at least 2/3rd of directors of Trustee Company must be independent and at-least 50% of directors of AMC must be independent.
NAV (Net Asset Value)
It measures performance of any Mutual Fund. It is calculated as under:

Market Value of Securities of scheme  - Expenses incurred on the scheme
Total number of units of a scheme as on date

NAV has to be disclosed by the Mutual Fund on regular basis – daily or weekly.

Types of Mutual Funds
There are two types of Mutual Funds:

Open Ended Plan
 It is available for subscription and repurchase on continuous basis. There is no fixed maturity period. Sale and Purchase is made at NAV on daily basis. NAV is declared on daily basis.

Close Ended Plan
Under this plan, there is fixed maturity period. Investors invest during Public Offer which is valid for some specified period. Sale and Purchase of units is made in Stock Exchanges.NAV is generally declared on weekly basis.

Growth Scheme or Equity Oriented Scheme
Growth Scheme of Mutual fund has following features:

·         Major part of Corpus is invested in Equities
·         The risk is higher
·         Capital appreciation is more if the market rises.
·         Chances of losses can also be not rules out
·          
Income Scheme or Debt Oriented Scheme
Income Scheme of Mutual fund has following features:
·         Major part of Corpus is invested in Bonds, Debentures and G-Secs
·         Risk is lesser as compared to Growth Scheme
·         Regular and Steady Income to investors
·         NAV is affected due to change in interest rates
·         Fall in Interest rates leads to Higher NAV.
Balanced Plan
Mixed Scheme of Mutual fund has following features:

·         It is a mixed plan. Investment is made in both equities and bonds.
·         The general proportion is 40 in equity and 60 in bonds.
·         Fund is affected by fluctuation in share market but not too much.
·         NAV is less volatile as compared to Equity Fund.
Other Plans
Gilt Fund: It consists of Investment in Govt. Securities

Index Fund:
The portfolio consists of particular Index securities such as BSE sensitive index or Nifty Index.

Tax Saving Schemes
Under this plan, money is invested in Tax Saving Securities under specific provisions of IT Act. For Example, ELSS (Equity Linked Saving Scheme) and Pension Plans launched by Mutual Funds are types of Tax Saving Schemes

Fund of Funds
 A scheme that invests primarily in other schemes of same mutual funds or other mutual funds is known as FOFs (Fund of Funds)

AMFI -
AMFI is Association of Mutual Funds of India Certificate Test.

It is an examination which has to be passed for new entrants in marketing and selling of units of Mutual Funds

Firms and Corporate have to obtain certificate of registration from AMFI whereas all employees engaged in marketing of these funds have to pass AMFI examination.


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