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MUTUAL FUNDS

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					         MUTUAL FUNDS

A Mutual Fund is a trust that pools the savings of a
number of investors who share a common financial
goal. The money thus collected is then invested in
capital market instruments such as shares, debentures
and other securities. The income earned through these
investments and the capital appreciation realized is
shared by its unit holders in proportion to the number
of units owned by them. Thus a Mutual Fund is the
most suitable investment for the common man as it
offers an opportunity to invest in a diversified,
professionally managed basket of securities at a
relatively low cost.
ORGANIZATION OF A MUTUAL FUND
The Organization of a Mutual Fund contains entities
 Mutual Fund Shareholders
The Mutual Fund Shareholders, like the other share holders have the right to vote.
Board of directors
The Board of directors supervise the functional activities, which include approval of the contract
    Asset Management Company and other various service providers.
Investment management company or Asset Management Company
This body handles the mutual fund portfolio as per the objectives and policies mentioned in the
    prospectus of the mutual funds
Custodians
The custodians protect the portfolio securities. Mostly qualified bank custodians are used for mutual
    funds.

Transfer Agents
The transfer agent for the purpose of maintaining records and similar functions. The maintenance of
     the shareholder's accounts, calculation of dividends to the be disbursed, sending information to
     the shareholders about the account statements, notices, and income tax information.
SEBI
The primary aim of the Securities Exchange Board of India is to protect the interest of the mutual
     fund investors.
        SETTING UP MUTUAL FUND

                        Mutual fund set up

A mutual fund is set up in the form of a trust, which has sponsor,
  trustees, asset management company (AMC) and custodian. The
  trust is established by a sponsor or more than one sponsor who is
  like promoter of a company. The trustees of the mutual fund hold
  its property for the benefit of the unit holders.
                    Asset Management Company
   Asset Management Company (AMC) approved by SEBI manages
  the funds by making investments in various types of securities.
  Custodian, who is registered with SEBI, holds the securities of
  various schemes of the fund in its custody. The trustees are vested
  with the general power of superintendence and direction over
  AMC. They monitor the performance and compliance of SEBI
  Regulations by the mutual fund.
ADVANTAGES OF MUTUAL FUNDS

1)Professional Management
2)Diversification
3)Convenient Administration
4)Return Potential
5)Low Costs
6)Liquidity
7)Transparency
8)Flexibility
9)Choice of schemes
10)Tax benefits
                         Types of mutual funds

(A) Schemes according to Maturity Period
Open-end fund
        The term mutual fund is the common name for what is classified as an open-end investment
     company by the SEC.
Close-ended Fund/ Scheme
        A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is
     open for subscription only during a specified period at the time of launch of the scheme.
(B) Schemes according to Investment Objective
        A scheme can also be classified as growth scheme, income scheme, or balanced scheme
     considering its investment objective.

Growth / Equity Oriented Scheme
        The aim of growth funds is to provide capital appreciation over the medium to long- term.
    Such schemes normally invest a major part of their corpus in equities.
Income / Debt Oriented Scheme
       The aim of income funds is to provide regular and steady income to investors. Such
    schemes generally invest in fixed income securities such as bonds, corporate debentures,
    Government securities and money market instruments.
Balanced Fund
   The aim of balanced funds is to provide both growth and regular income
   as such schemes invest both in equities and fixed income securities in the
   proportion indicated in their offer documents.

Money Market or Liquid Fund
  These funds are also income funds and their aim is to provide easy
  liquidity, preservation of capital and moderate income.

Gilt Fund
   These funds invest exclusively in government securities. Government
   securities have no default risk.
Index Funds
   Index Funds replicate the portfolio of a particular index such as the BSE
   Sensitive index, S&P NSE 50 index (Nifty), etc These schemes invest in
   the securities in the same weight age comprising of an index.
           Growth of Mutual Funds in India

1.In the past 6 years, Mutual Funds in India have recorded a growth of 100 %.
2.In India, the rate of saving is 23 %.
3.In the future, there lies a big scope for the Indian Mutual Funds industry to
    expand.
4.Several asset management companies which are foreign based are now
    entering the Indian markets.
5.A number of commodity Mutual Funds will be introduced in the future. The
    SEBI (Securities Exchange Board of India) has granted the permission for
    the same
6.More emphasis is put on the effective Mutual Funds governance.
    MUTUAL FUND SCHEMES IN INDIA
                   Kotak Mahindra Asset Management Co. Ltd
Kotak Mahindra Bank Limited, one of India's fastest growing banks, with a pedigree of
over twenty years in the Indian Financial Markets.

                               Tata Mutual Fund
Tata Mutual Fund was setup on June 30, 1995. The Asset Management Company of Tata
Mutual Fund is Tata Asset Management Limited, incorporated on March 15, 1994.

                                 SBI Mutual Fund

SBI Mutual Fund operates under State Bank of India and Société Générale Asset
Management of France and has asset management experience of more than 25 years. SBI
Mutual Fund offers different kinds of products like growth based products, income based
products and balanced funds.

                                LIC Mutual Fund
 Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989 with a
corpus of Rs. 2 crores. LIC Mutual Funds are managed by LIC Mutual Fund Asset
Management Company Ltd, which was formed on 20th April 1994 in compliance with the
Securities and Exchange Board of India (Mutual Funds) Regulations, 1993.
                  CONCLUSION
1.A mutual fund brings together a group of people and invests their money in
    stocks, bonds, and other securities.
2. The advantages of mutuals are professional management, diversification,
    economies of scale, simplicity and liquidity.
3.The disadvantages of mutuals are high costs, over-diversification, possible
    tax consequences, and the inability of management to guarantee a superior
    return.
4.Mutual funds have lots of costs.

5.Costs can be broken down into ongoing fees (represented by the expense
   ratio) and transaction fees (loads).
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