mutual fund
Content
MUTUAL FUNDS AND ITS TYPES
Submitted To:
ANKIT SAXENA SIR
Submitted By:
SANDHYA GOYAL
MUTUAL FUND
A mutual fund is a investment that uses money from many investors To invest in stocks , bonds, or other types of investment earn income through interest on bonds, dividend on stocks. A fund manager decides how and where to invest our money and for this they charge a fee. SEBI definition, ”A fund established in the form of a trust by a sponsor, to raise money by the trustees through the sale of units to the public , under one or more schemes ,for investing in securities in accordance with the SEBI regulations.”,
Till 1986 the Unit Trust of India was the only mutual fund in India. After liberalization new entrants were come into the existence like banks and insurance companies. Mutual fund invest in three broad categories i.e. a) stock:- it includes equity and equity related instruments. b) bonds:-it includes debt instruments that have a maturity of more than one year. c) cash:- it includes debt instruments that have a maturity of less than one year and bank deposits
CLASSIFICATION OF FUNDS
On the basis of investment object a) Equity funds b) Debt funds c) Hybrid funds d) Money market funds
On the basis of constitution a) Close ended b) Open ended
EQUITY FUNDS:-
ON THE BASIS OF INVESTMENT
companies listed on . b) it is classified into various categories i.e. b.i) Diversified Equity Scheme:- these schemes invest in a diversified portfolio of equity stocks. b.ii)Index Schemes:-An index fund is a mutual fund or
a) This type of mutual fund makes investments in the stocks of
exchange-traded fund) that aims to replicate the movements of an index of a specific financial market. b.iii) Sectoral Schemes:- In the investment is make in a particular sector such as pharmaceuticals, IT, telecom and so on. b.iv) Tax Planning Schemes:a)Tax planning schemes or Equity linked saving Schemes are generally open to only individuals and HUF.
b)As per section 80 C of the Income Tax subscriptions to such schemes can be deducted before computing the taxable income like Franklin India Taxshield and HDFC Tax plan 2000 and so on.
Note: Equity Linked Saving Scheme (ELSS) is a type of equity
mutual fund that invests major portion of its corpus into equity and equity related instruments. The only difference is that ELSS offers tax deduction benefits up to Rs 1 lakh under section 80C andYour money gets locked in for three years. After three years, you are free to exit or stay invested and enjoy equity returns over a long period of time.
BOND/ DEBT FUNDS:
i)Bond or Debt mutual funds include bonds issued by the Government and other institutions in their fund portfolio.
ii)The portfolio of the mutual fund may include investments in a mix of Government securities, corporate bonds, Public Sector Unit (PSU) bonds
iii.) it is divided into the 4 Categories a) Gilt Schemes: - This schemes invest in only in government bonds and cash. b) Mixed Debt Schemes: This scheme is invest in government bonds, corporate bonds and cash. c) Floating Rate Debt Schemes:- This scheme is invest in a portfolio comprising substantially of floating rate debt bonds, fixed rate bonds swapped for floating rate returns and cash. d) Cash Schemes:- They are also called liquid schemes invest in money market instruments and bank deposits.
HYBRID / BALANCED FUNDS:- It is a type of mutual fund that buys a combination of common stock, preferred stock, bonds, and short-term bonds(balance of equity or debt mix). It is further classified also into 3 categories a)Equity Oriented Schemes:- In this schemes equities which may account for about 60%of the portfolio, the balance is being invested in debt instruments(bonds and cash). b)Debt oriented Schemes:- It is in favor of debt instruments in which debt component of 80-85%and equity components holds 10-15%. c) Variable Asset Allocation Schemes: In this the proportions of equity and debt varied often on the basis of some objective criteria
MONEY MARKET FUNDS:- A money market fund is a mutual fund that invests solely in money market instruments. Money market instruments are forms of debt that mature in less than one year and are very liquid.
On the basis of Constitution
CLOSE ENDED:- Funds that can sell a fixed number of
units are known as Closed-end Funds. The fund size of a Closed-end Fund remains unchanged at all times. The NAV of a closed-end fund is computed on a weekly basis.
OPEN ENDED:- Funds that can sell and purchase units at
any point in time are classified as Open-end Funds. The fund size of an open-end fund is variable (keeps changing) because of continuous selling (to investors) and repurchases (from the investors) by the fund. The NAV of an open-end fund is calculated every day.
Difference Between Close Ended and Open Ended
• Close ended scheme is kept only for a limited period • Open ended scheme accept funds from investor by offering shares on a continuing basis
subscription
withdraw
• Close ended scheme does not allow to withdraw funds as and when they like • Open ended scheme permits investor to withdraw funds on a continuing basis under a repurchase agreement
• Close ended scheme has a fixed maturity period( usually 5 to 15years) and are listed on the secondary market Maturity period • Open ended scheme has no maturity period and ordinarily not listed and listed
NOTE: NAV means total value of the securities in the
fund minus liabilities, divided by shares outstanding. For example, if a fund has assets of $50 million and liabilities of $10 million, it would have a NAV of $40 million. if the fund had 4 million shares outstanding, the price-per-share value would be $40 million divided by 4 million, which equals $10.
OTHER FUNDS
Growth fund:
This type of mutual fund targets aggressive capital appreciation. The financial objective of a growth fund is to see the investment exhibit optimal growth over a period of time. This approach is riskier and more volatile than a regular income mutual fund.
Dividend funds:
As the name implies, the investment objective here is regular income in the form of dividends. Capital appreciation is not the important goal. Regular income funds are safer than a Growth fund.
Fund of Funds
This special type of mutual fund invests in other mutual funds rather than investing directly in shares, bonds or other securities all over the world or in specific countries.
Submitted To:
ANKIT SAXENA SIR
Submitted By:
SANDHYA GOYAL
MUTUAL FUND
A mutual fund is a investment that uses money from many investors To invest in stocks , bonds, or other types of investment earn income through interest on bonds, dividend on stocks. A fund manager decides how and where to invest our money and for this they charge a fee. SEBI definition, ”A fund established in the form of a trust by a sponsor, to raise money by the trustees through the sale of units to the public , under one or more schemes ,for investing in securities in accordance with the SEBI regulations.”,
Till 1986 the Unit Trust of India was the only mutual fund in India. After liberalization new entrants were come into the existence like banks and insurance companies. Mutual fund invest in three broad categories i.e. a) stock:- it includes equity and equity related instruments. b) bonds:-it includes debt instruments that have a maturity of more than one year. c) cash:- it includes debt instruments that have a maturity of less than one year and bank deposits
CLASSIFICATION OF FUNDS
On the basis of investment object a) Equity funds b) Debt funds c) Hybrid funds d) Money market funds
On the basis of constitution a) Close ended b) Open ended
EQUITY FUNDS:-
ON THE BASIS OF INVESTMENT
companies listed on . b) it is classified into various categories i.e. b.i) Diversified Equity Scheme:- these schemes invest in a diversified portfolio of equity stocks. b.ii)Index Schemes:-An index fund is a mutual fund or
a) This type of mutual fund makes investments in the stocks of
exchange-traded fund) that aims to replicate the movements of an index of a specific financial market. b.iii) Sectoral Schemes:- In the investment is make in a particular sector such as pharmaceuticals, IT, telecom and so on. b.iv) Tax Planning Schemes:a)Tax planning schemes or Equity linked saving Schemes are generally open to only individuals and HUF.
b)As per section 80 C of the Income Tax subscriptions to such schemes can be deducted before computing the taxable income like Franklin India Taxshield and HDFC Tax plan 2000 and so on.
Note: Equity Linked Saving Scheme (ELSS) is a type of equity
mutual fund that invests major portion of its corpus into equity and equity related instruments. The only difference is that ELSS offers tax deduction benefits up to Rs 1 lakh under section 80C andYour money gets locked in for three years. After three years, you are free to exit or stay invested and enjoy equity returns over a long period of time.
BOND/ DEBT FUNDS:
i)Bond or Debt mutual funds include bonds issued by the Government and other institutions in their fund portfolio.
ii)The portfolio of the mutual fund may include investments in a mix of Government securities, corporate bonds, Public Sector Unit (PSU) bonds
iii.) it is divided into the 4 Categories a) Gilt Schemes: - This schemes invest in only in government bonds and cash. b) Mixed Debt Schemes: This scheme is invest in government bonds, corporate bonds and cash. c) Floating Rate Debt Schemes:- This scheme is invest in a portfolio comprising substantially of floating rate debt bonds, fixed rate bonds swapped for floating rate returns and cash. d) Cash Schemes:- They are also called liquid schemes invest in money market instruments and bank deposits.
HYBRID / BALANCED FUNDS:- It is a type of mutual fund that buys a combination of common stock, preferred stock, bonds, and short-term bonds(balance of equity or debt mix). It is further classified also into 3 categories a)Equity Oriented Schemes:- In this schemes equities which may account for about 60%of the portfolio, the balance is being invested in debt instruments(bonds and cash). b)Debt oriented Schemes:- It is in favor of debt instruments in which debt component of 80-85%and equity components holds 10-15%. c) Variable Asset Allocation Schemes: In this the proportions of equity and debt varied often on the basis of some objective criteria
MONEY MARKET FUNDS:- A money market fund is a mutual fund that invests solely in money market instruments. Money market instruments are forms of debt that mature in less than one year and are very liquid.
On the basis of Constitution
CLOSE ENDED:- Funds that can sell a fixed number of
units are known as Closed-end Funds. The fund size of a Closed-end Fund remains unchanged at all times. The NAV of a closed-end fund is computed on a weekly basis.
OPEN ENDED:- Funds that can sell and purchase units at
any point in time are classified as Open-end Funds. The fund size of an open-end fund is variable (keeps changing) because of continuous selling (to investors) and repurchases (from the investors) by the fund. The NAV of an open-end fund is calculated every day.
Difference Between Close Ended and Open Ended
• Close ended scheme is kept only for a limited period • Open ended scheme accept funds from investor by offering shares on a continuing basis
subscription
withdraw
• Close ended scheme does not allow to withdraw funds as and when they like • Open ended scheme permits investor to withdraw funds on a continuing basis under a repurchase agreement
• Close ended scheme has a fixed maturity period( usually 5 to 15years) and are listed on the secondary market Maturity period • Open ended scheme has no maturity period and ordinarily not listed and listed
NOTE: NAV means total value of the securities in the
fund minus liabilities, divided by shares outstanding. For example, if a fund has assets of $50 million and liabilities of $10 million, it would have a NAV of $40 million. if the fund had 4 million shares outstanding, the price-per-share value would be $40 million divided by 4 million, which equals $10.
OTHER FUNDS
Growth fund:
This type of mutual fund targets aggressive capital appreciation. The financial objective of a growth fund is to see the investment exhibit optimal growth over a period of time. This approach is riskier and more volatile than a regular income mutual fund.
Dividend funds:
As the name implies, the investment objective here is regular income in the form of dividends. Capital appreciation is not the important goal. Regular income funds are safer than a Growth fund.
Fund of Funds
This special type of mutual fund invests in other mutual funds rather than investing directly in shares, bonds or other securities all over the world or in specific countries.
