What is a Mutual Fund Load?

Load is the factor that is applied to the Net Asset Value (NAV) of a mutual fund scheme to arrive at the price. If a commission is paid to agents to bring in new business this represents the cost incurred by the mutual fund for additional sale. The fund may therefore decide that, investors who are already in the scheme need not bear this cost. Therefore, it may decide to impose this cost on the new investors by increasing the price at which they can buy units. This is called the sales load. Similarly, if an investor stays in a fund for a short while and decides to repurchase his units, the fund may incur some costs in liquidating the portfolio and paying off this investor.… Read the rest

Mutual Fund Products

There are a variety of ways in which mutual funds are created to accommodate varied risk and return requirements of investors. Depending on the investment portfolio that is created and the segments of the various markets in which funds are invested, there is a choice of funds to investors. Mutual funds can offer further broad choices to the investors in terms of:

  • Nature of participation: Open and close-end funds.
  • Nature of income distribution: Dividend, growth and reinvestment of dividends.

Mutual Fund Products based on the Nature of Participation

1. Open-Ended Mutual Funds

An open-ended mutual fund remains open for issue and redemption of its shares throughout its unlimited duration.… Read the rest

Mutual Funds and Stock Analysis

The investment pattern in a mutual fund depends on investment objective. The Asset Management Company (AMC) team includes the research analysts, fund managers and dealers appointed by AMC itself. The fund manager is held responsible for all the investment decisions taken and also takes decision on the investment pattern, of the scheme based on the objectives of the scheme. Information with regard to various investment opportunities are provided by the research team and the dealers implement the decision of the fund manager. The fund manager uses both primary and secondary markets for actually investing the funds. The deals are placed through the fund’s brokers and the custodians take care of the back office operations involved in the investment decisions.… Read the rest

Mutual Fund Performance Benchmarks

Benchmarks are independent portfolios and a representation of behavior of returns from the market. Benchmarks are not managed by fund managers. In simple words, a standard for evaluating the performance of mutual fund investments. To better understand the concept of benchmark it is very important to know the job of a mutual fund. For example, the S&P CNX Nifty is a portfolio of 50 securities traded on the National Stock Exchange. The BSE Sensitive index is a portfolio of 30 securities traded on Bombay Stock Exchange. The movement of these indices represents the movement in prices and returns on the stock traded in the equity market.… Read the rest

Mutual Funds in India

The Mutual Fund industry started with the setting up of Unit Trust of India. The money market mutual fund segment has a total corpus of $1.48 trillion in the USA against a corpus of $100 million in India. The entry of private sector and foreign institutions in 1993 provided a boost to the Indian mutual fund industry in the form of different schemes launched. The Government of India took the initiative of developing mutual fund industry by offering various tax soaps in the budget and enabling it to play an important role in mobilization of savings and in the development of the financial market.… Read the rest

Organization of Mutual Fund

Mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. This pool of money is invested in accordance with a stated objective. The joint ownership of the fund is thus “Mutual”, i.e. the fund belongs to all investors. 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 appreciations realized are shared by its unit holders in proportion 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.… Read the rest