INDEX

S. NO.
1.

CONTENTS
MUTUAL FUNDS MEANING

PAGE NO.
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2.

MF ADVANTAGES & DISADVANTAGES

3.

TYPES OF MUTUAL FUNDS OPEN, CLOSE, INTERVAL

4.

ON THE BASIS OF NATURE EQUITY, DEBT, BALANCED ON THE BASIS OF INVESTMENT OBJECTIVE INCOME, GROWTH, BALANCED, MONEY MARKET OTHER SCHEMES TAX-SAVING SCHEME, INDEX SCHEME, SECTOR SPECIFIC SCHEMES

6,7,8

5.

6.

10, 11

7.

BIBLIOGRAPHY

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MUTUAL FUNDS
A mutual fund is a type of professionally managed collective investment vehicle that pools money from many investors to purchase securities. While there is no legal definition of the term "mutual fund", it is most commonly applied only to those collective investment vehicles that are regulated and sold to the general public. They are sometimes referred to as "investment companies" or "registered investment companies." Most mutual funds are "open-ended," meaning investors can buy or sell shares of the fund at any time. Hedge funds are not considered a type of mutual fund.

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 realised are 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.

Mutual funds have both advantages and disadvantages compared to direct investing in individual securities. They have a long history in the United States. Today they play an important role in household finances, most notably in retirement planning. Mutual funds are generally classified by their principal investments. The four main categories of funds are money market funds, bond or fixed income funds, stock or equity funds and hybrid funds. Funds may also be categorized as index or actively managed. Investors in a mutual fund pay the funds expenses, which reduce the fund's returns/performance. There is controversy about the level of these expenses. A single mutual fund may give investors a choice of different combinations of expenses by offering several different types of share classes.
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The first mutual funds were established in Europe. One researcher credits a Dutch merchant with creating the first mutual fund in 1774. The first mutual fund outside the Netherlands was the Foreign & Colonial Government Trust, which was established in London in 1868. It is now the Foreign & Colonial Investment Trust and trades on the London stock exchange. Mutual funds were introduced into the United States in the 1890. They became popular during the 1920s. These early funds were generally of the closed-end type with a fixed number of shares which often traded at prices above the value of the portfolio.

ADVANTAGES OF MUTUAL FUNDS

Increased diversification Daily liquidity Professional investment management Ability to participate in investments that may be available only to larger investors Service and convenience Government oversight Ease of comparison

DISADVANTAGES OF MUTUAL FUNDS

Fees Less control over timing of recognition of gains Less predictable income No opportunity to customize

TYPES OF MUTUAL FUND

Open-ended mutual Funds
In case of Open-ended mutual funds, the fund itself is ready to buy back the shares surrendered and sell new shares. Thus there is no fix number of outstanding shares. Ordinarily, the transaction of purchase or sale is made at the net assets value calculated every now and then. The repurchase price is usually slightly lower than the selling price. The net assets value of the mutual finds increase or decreases depending upon the performance of securities in the portfolio of the mutual fund. Most of the mutual funds started by the commercial banks in India in this category. For Example: Religare Mid Cap Fund, Birla Sun Life Monthly Income- Growth

Close-ended Mutual Funds

In case of close-ended mutual funds, the mutual fund management sells a limited number of shares. It does not stand ready to redeem or re-purchase these shares. Primary example of closeend mutual fund is UTIs master-share. The shares of close-end mutual fund are purchased and sold in the secondary markets. For Example: UTI Fixed Term Income Fund - Series X - Plan 3 - Growth, Birla Sun Life Fixed Term Plan - Series DK - Growth, ICICI Prudential Multiple Yield Fund - Plan E Growth

Interval or Mixed Mutual Funds

Interval Mutual Funds or Mixed Mutual Funds are those mutual funds that is mix of Open-end mutual Funds and Close-end Mutual Funds. Interval Mutual Funds have mix features and characteristics of Open-end mutual Funds and Close-end Mutual Funds. For Example: Reliance Interval Funds

BY NATURE :

Equity fund : These funds invest a maximum part of their corpus into equities holdings. The structure of the fund may vary different for different schemes and the fund managers outlook on different stocks. The Equity Funds are sub-classified depending upon their investment objective, as follows :
o o o o o

Diversified Equity Funds Mid-Cap Funds Sector Specific Funds Tax Savings Funds (ELSS) Equity investments are meant for a longer time horizon, thus Equity funds rank high on the risk-return matrix.

For Example: HDFC Top 200

13 year old fund , Return Since Launch is excellent : 25.3% Strong 5 yrs return at 31.8% beating its benchmark by 7% . 65% Portfolio in Large and Giant Companies and 30% in Mid caps . Well Diversified Fund

One of the best funds available with long term Track record . Must Have

Magnum Contra

10 year old fund , Return Since Launch is excellent : 27.6% Strong 5 yrs return at 35.86% beating its benchmark by astonishing 11% . 55% Portfolio in Large and Giant Companies and 35% in Mid caps and Small cap .

Debt funds : The objective of these Funds is to invest in debt papers. Government authorities, private companies, banks and financial institutions are some of the major issuers of debt papers. By investing in debt instruments, these funds ensure low risk and provide stable income to the investors. Debt funds are further classified as :
o

Gilt Funds : Invest their corpus in securities issued by Government, popularly known as Government of India debt papers. These Funds carry zero Default risk but are associated with Interest Rate risk. These schemes are safer as they invest in papers backed by Government.

Income Funds : Invest a major portion into various debt instruments such as bonds, corporate debentures and Government securities.

Short Term Plans (STPs): Meant for investment horizon for three to six months. These funds primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs). Some portion of the corpus is also invested in corporate debentures.

Liquid Funds : Also known as Money Market Schemes, These funds provides easy liquidity and preservation of capital. These schemes invest in short-term instruments like Treasury Bills, inter-bank call money market, CPs and CDs. These funds are meant for short-term cash management of corporate houses and are meant for an investment horizon of 1day to 3 months. These schemes rank low on risk-return matrix and are considered to be the safest amongst all categories of mutual funds.

For Example: UTI Mahila Unit Scheme

16%+ return Since Launch, 8 yrs old Fund , Excellent Track Record . This is my Favorite Mutual Fund . Amazing one .. Read a complete review for this Mutual Fund Here
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Tata Young Citizens

14 yrs old Fund, Excellent Returns , This is extremely Risky Fund .. Dont consider this as a Debt Oriented Fund

Equity Component is very high at 50% . So I am not sure if this will suit as Debt Oriented Fund .. only people with strong heart should take this .

UTI CRTS 81

One of the Best Funds , 28 yrs old fund , Lambi Race ka Ghoda , 13%+ return CAGR which is amazing for any debt oriented fund .

Equity Exposure of less than 30% and the worst return ever in 1 time period is -14% , the best is 35-40% in a year .

HDFC Multiple Yield Plan 2005

4 yrs old fund , Extremely low Equity Exposure of less than 15% , Average return Looks great for Future performance . Balanced funds : As the name suggest they, are a mix of both equity and debt funds. They invest in both equities and fixed income securities, which are in line with pre-defined investment objective of the scheme. These schemes aim to provide investors with the best of both the worlds. Equity part provides growth and the debt part provides stability in returns.

For Example: ICICI Pru BAlanced Funds (G), SBI Magnum MIP (G)

BY INVESTMENT OBJECTIVE :

Growth Schemes Growth Schemes are also known as equity schemes. The aim of these schemes is to provide capital appreciation over medium to long term. These schemes normally invest a major part of their fund in equities and are willing to bear short-term decline in value for possible future appreciation. For Example: Birla Advantage Fund run by Birla Sun Life Mutual Fund and Baroda Global Fund run by BOB Mutual Fund

Income Schemes Income Schemes are also known as debt schemes. The aim of these schemes is to provide regular and steady income to investors. These schemes generally invest in fixed income securities such as bonds and corporate debentures. Capital appreciation in such schemes may be limited. For Example: Franklin Templeton Mutual Fund's FT India Monthly Income Plan and Canbank Mutual fund's CANINCOME

Balanced Schemes Balanced Schemes aim to provide both growth and income by periodically distributing a part of the income and capital gains they earn. These schemes invest in both shares and fixed income securities, in the proportion indicated in their offer documents. For Example: Tata Mutual Fund's Tata Balanced Fund Growth and UTI Mutual Fund's UTI Balance

Money Market Schemes Money Market Schemes aim to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer, short-term instruments, such as treasury bills, certificates of deposit, commercial paper and inter-bank call money.

For Example: Fidelity Mutual Fund's Fidelity Short Term Income Fund and Franklin Templeton Mutual Fund's Templeton India Liquid Plus

OTHER SCHEMES

Tax Saving Schemes

Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate.

For Example: Canara Robeco Equity Tax Saver Regular, ICICI Prudential Tax Plan,
HDFC Tax Saver, Franklin India Tax Shield

Index Scheme :
Index schemes attempt to replicate the performance of a particular index such as the BSE Sensex or the CNX S&P Nifty. The portfolio of these schemes will consist of only those stocks that constitute the index. The percentage of each stock to the total holding will be identical to the stocks index weightage. And hence, the returns from such schemes would be more or less equivalent to those of the Index.

For Example: Reliance Index Nifty

Sector Specific Schemes :

These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time.

For Example: Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG),

Petroleum stocks.The returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are also likely to be more risky compared to multi sectoral diversified funds.

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REFERENCES

http://en.wikipedia.org/wiki/Mutual_fund http://www.jmfinancialmf.com/KC/?SubReportID=ED362A01-64E4-4055-86A584E80A1C5A50

http://www.financialadvisors.dspblackrock.com/videos/educational-videos/selected-eduvideo.aspx?ID=0322988d-78dd-40a7-bedf-cbdfb8406af5&lang=Eng

http://www.paisatalks.com/tax-saving-mutual-funds-top-5-for-2012-13.html http://www.investmentkit.com/mutualfunds/typesofmutualfunds.shtml http://www.rediff.com/getahead/2007/feb/22fund.htm http://www.moneycontrol.com/mutual-funds/best-funds/hybrid.html http://www.jagoinvestor.com/2009/11/list-of-best-debt-oriented-mutual-funds-for-20092010.html

http://earn1money.com/what-are-mutual-funds-types-of-mutual-funds-in-india-examplesof-mutual-funds-investment-procedure-of-mutual-funds-in-india/

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