These days you are hearing more and more about mutual funds as a means of investment.

If you are like most

people, you probably have most of your money in a bank savings account and your biggest investment may be your
home. Apart from that, investing is probably something you simply do not have the time or knowledge to get involved
in. You are not the only one. This is why investing through mutual funds has become such a popular way of investing.

What is a Mutual Fund?

A mutual fund is a pool of money from numerous investors who wish to save or make money just like you. Investing in
a mutual fund can be a lot easier than buying and selling individual stocks and bonds on your own. Investors can sell
their shares when they want.
Professional Management. Each fund's investments are chosen and monitored by qualified professionals who use
this money to create a portfolio. That portfolio could consist of stocks, bonds, money market instruments or a
combination of those.
Fund Ownership. As an investor, you own shares of the mutual fund, not the individual securities. Mutual funds
permit you to invest small amounts of money, however much you would like, but even so, you can benefit from being
involved in a large pool of cash invested by other people. All shareholders share in the fund' s gains and losses on an
equal basis, proportionately to the amount they've invested.
Mutual Funds are Diversified
By investing in mutual funds, you could diversify your portfolio across a large number of securities so as to minimise
risk. By spreading your money over numerous securities, which is what a mutual fund does, you need not worry
about the fluctuation of the individual securities in the fund's portfolio.
Mutual Fund Objectives
There are many different types of mutual funds, each with its own set of goals. The investment objective is the goal
that the fund manager sets for the mutual fund when deciding which stocks and bonds should be in the fund's
portfolio.
For example, an objective of a growth stock fund might be: This fund invests primarily in the equity markets with the
objective of providing long-term capital appreciation towards meeting your long-term financial needs such as
retirement or a child' s education.
Depending on investment objectives, funds can be broadly classified in the following 5 types:

Aggressive growth means that you will be buying into stocks which have a chance for dramatic growth and
may gain value rapidly. This type of investing carries a high element of risk with it since stocks with dramatic
price appreciation potential often lose value quickly during downturns in the economy. It is a great option for
investors who do not need their money within the next five years, but have a more long-term perspective. Do not
choose this option when you are looking to conserve capital but rather when you can afford to potentially lose
the value of your investment.

As with aggressive growth, growth seeks to achieve high returns; however, the portfolios will consist of a
mixture of large-, medium- and small-sized companies. The fund portfolio chooses to invest in stable, well
established, blue-chip companies together with a small portion in small and new businesses. The fund manager
will pick, growth stocks which will use their profits grow, rather than to pay out dividends. It is a medium - longterm commitment, however, looking at past figures, sticking to growth funds for the long-term will almost always
benefit you. They will be relatively volatile over the years so you need to be able to assume some risk and be
patient.
A combination of growth and income funds, also known as balanced funds, are those that have a mix of
goals. They seek to provide investors with current income while still offering the potential for growth. Some funds

buy stocks and bonds so that the portfolio will generate income whilst still keeping ahead of inflation. They are
able to achieve multiple objectives which may be exactly what you are looking for. Equities provide the growth
potential, while the exposure to fixed income securities provide stability to the portfolio during volatile times in the
equity markets. Growth and income funds have a low-to-moderate stability along with a moderate potential for
current income and growth. You need to be able to assume some risk to be comfortable with this type of fund
objective.
That brings us to income funds. These funds will generally invest in a number of fixed-income securities.
This will provide you with regular income. Retired investors could benefit from this type of fund because they
would receive regular dividends. The fund manager will choose to buy debentures, company fixed deposits etc.
in order to provide you with a steady income. Even though this is a stable option, it does not go without some
risk. As interest-rates go up or down, the prices of income fund shares, particularly bonds, will move in the
opposite direction. This makes income funds interest rate sensitive. Some conservative bond funds may not
even be able to maintain your investments' buying power due to inflation.
The most cautious investor should opt for the money market mutual fund which aims at maintaining capital
preservation. The word preservation already indicates that gains will not be an option even though the interest
rates given on money market mutual funds could be higher than that of bank deposits. These funds will pose
very little risk but will also not protect your initial investments' buying power. Inflation will eat up the buying power
over the years when your money is not keeping up with inflation rates. They are, however, highly liquid so you
would always be able to alter your investment strategy.

Open-end funds[edit]
Main article: Open-end fund
Open-end mutual funds must be willing to buy back their shares from their investors at the end of
every business day at the net asset value (NAV) computed that day. Most open-end funds also sell
shares to the public every day; these shares are also priced at NAV. A professional investment
manager oversees the portfolio, buying and selling securities as appropriate. The total investment in
the fund will vary based on share purchases, share redemptions and fluctuation in market valuation.
There is no legal limit on the number of shares that can be issued.
Open-end funds are the most common type of mutual fund. At the end of 2014, there were 7,923
open-end mutual funds in the United States with combined assets of $15.9 trillion. [11]

Closed-end funds[edit]
Main article: Closed-end fund
Closed-end funds generally issue shares to the public only once, when they are created through
an initial public offering. Their shares are then listed for trading on a stock exchange. Investors who
no longer wish to invest in the fund cannot sell their shares back to the fund (as they can with an
open-end fund). Instead, they must sell their shares to another investor in the market; the price they
receive may be significantly different from NAV. It may be at a "premium" to NAV (i.e., higher than
NAV) or, more commonly, at a "discount" to NAV (i.e., lower than NAV). A professional investment
manager oversees the portfolio, buying and selling securities as appropriate.

At the end of 2014, there were 568 closed-end funds in the United States with combined assets of
$289 billion.[11]

Unit investment trusts[edit]

Main article: Unit investment trust
Unit investment trusts (UITs) can only issue to the public once, when they are created. UITs
generally have a limited life span, established at creation. Investors can redeem shares directly with
the fund at any time (similar to an open-end fund) or wait to redeem them upon the trust's
termination. Less commonly, they can sell their shares in the open market. Unit investment trusts do
not have a professional investment manager; their portfolio of securities is established at the UIT's
creation and does not change.
At the end of 2014, there were 5,381 UITs in the United States with combined assets of $101 billion.
[11]

Exchange-traded funds[edit]
Main article: Exchange-traded fund
A relatively recent innovation, exchange-traded funds (ETFs) are structured as open-end investment
companies or UITs. ETFs are part of a larger category of investment vehicles known as "exchangetraded products" (ETPs), which, other than ETFs, may be structured as a partnership or grantor trust
or may take the form of an exchange-traded note. Non-ETF exchange-traded products may be used
to provide exposure to currencies and commodities.
ETFs combine characteristics of both closed-end funds and open-end funds. ETFs are traded
throughout the day on a stock exchange. An arbitrage mechanism is used to keep the trading price
close to net asset value of the ETF holdings.
Most ETFs are passively managed index funds, though actively managed ETFs are becoming more
common.
ETFs have been gaining in popularity. At the end of 2014, there were 1,411 ETFs in the United
States with combined assets of $2.0 trillion.[11]

Benefits of investing in a mutual fund?

As an investor, you would like to get maximum returns on your investments, but you may not have the time to
continuously study the stock market to keep track of them. You need a lot of time and knowledge to decide what to

buy or when to sell. A lot of people take a chance and speculate, some get lucky, most don t. This is where mutual
funds come in. Mutual funds offer you the following advantages :
Professional management. Qualified professionals manage your money, but they are not alone. They have a
research team that continuously analyses the performance and prospects of companies. They also select suitable
investments to achieve the objectives of the scheme. It is a continuous process that takes time and expertise which
will add value to your investment. Fund managers are in a better position to manage your investments and get higher
returns.
Diversification. The clich, "don't put all your eggs in one basket" really applies to the concept of intelligent
investing. Diversification lowers your risk of loss by spreading your money across various industries and geographic
regions. It is a rare occasion when all stocks decline at the same time and in the same proportion. Sector funds
spread your investment across only one industry so they are less diversified and therefore generally more volatile.
More choice. Mutual funds offer a variety of schemes that will suit your needs over a lifetime. When you enter a new
stage in your life, all you need to do is sit down with your financial advisor who will help you to rearrange your
portfolio to suit your altered lifestyle.
Affordability. As a small investor, you may find that it is not possible to buy shares of larger corporations. Mutual
funds generally buy and sell securities in large volumes which allow investors to benefit from lower trading costs. The
smallest investor can get started on mutual funds because of the minimal investment requirements. You can invest
with a minimum of Rs.500 in a Systematic Investment Plan on a regular basis.
Tax benefits. Investments held by investors for a period of 12 months or more qualify for capital gains and will be
taxed accordingly. These investments also get the benefit of indexation.
Liquidity. With open-end funds, you can redeem all or part of your investment any time you wish and receive the
current value of the shares. Funds are more liquid than most investments in shares, deposits and bonds. Moreover,
the process is standardised, making it quick and efficient so that you can get your cash in hand as soon as possible.
Rupee-cost averaging. With rupee-cost averaging, you invest a specific rupee amount at regular intervals
regardless of the investment's unit price. As a result, your money buys more units when the price is low and fewer
units when the price is high, which can mean a lower average cost per unit over time. Rupee-cost averaging allows
you to discipline yourself by investing every month or quarter rather than making sporadic investments.
Transparency. The performance of a mutual fund is reviewed by various publications and rating agencies, making it
easy for investors to compare fund to another. As a unitholder, you are provided with regular updates, for example
daily NAVs, as well as information on the fund's holdings and the fund manager's strategy.
Regulations. All mutual funds are required to register with SEBI (Securities Exchange Board of India). They are
obliged to follow strict regulations designed to protect investors. All operations are also regularly monitored by the
SEBI.

Mutual funds have disadvantages as well, which include:[4]

Fees

Less control over timing of recognition of gains

Less predictable income

No opportunity to customize

No, we do not give any guarantees on the returns on any of our funds.

No. Mutual fund units are not insured by the government, or any government agency, and do not have any
other type of insurance, unlike certain types of checking or savings accounts and certificates of deposit. There is
no guarantee that when you sell your shares, you will receive what you paid for them.

The first introduction of a mutual fund in India occurred in 1963, when the Government of
India launched Unit Trust of India (UTI).[1] Until 1987, UTI enjoyed a monopoly in the Indian mutual
fund market. Then a host of other government-controlled Indian financial companies came up with
their own funds. These included State Bank of India, Canara Bank, and Punjab National Bank.
The first private sector fund to operate in India was Kothari Pioneer, which later merged
with Franklin Templeton. In 1996, SEBI, the regulator of mutual funds in India, formulated the Mutual
Fund Regulation which is a comprehensive regulatory framework.[2]Income from MFs could take two
formsdividends and capital gains.[3]

Mutual funds are an under tapped market in India[edit]

Despite being available in the market[4] less than 10% of Indian households have invested in mutual
funds.[citation needed] A recent report on Mutual Fund Investments in India published by research and
analytics firm, Boston Analytics, suggests investors are holding back from putting their money into
mutual funds due to their perceived high risk and a lack of information on how mutual funds work.
[5]

There are 46 Mutual Funds as of June 2013.[6]

Mutual fund distribution in India[edit]

Mutual fund investments are sourced both from institutions (companies) and individuals. Since
January 2013, institutional investors have moved to investing directly with the mutual funds since
doing so saves on the expense ratio incurred. Individual investors are, however, served mostly
by Investment advisor and banks. Since 2009, online platforms for investing in Mutual funds have
also evolved.

Average assets under management[edit]

Assets under management (AUM) is a financial term denoting the market value of all the funds being
managed by a financial institution (a mutual fund, hedge fund, private equity firm, venture capital
firm, or brokerage house) on behalf of its clients, investors, partners, depositors, etc.
The average assets under management of all mutual funds in India for the quarter 13 July to 13
September (in INR billion) is given below:[7]

Sr No

Mutual Fund Name

Average AUM

Grand Total

8,142.68

100.0%

HDFC Mutual Fund

1,034.42

12.70%

Reliance Mutual Fund

952.28

11.69%

ICICI Prudential Mutual Fund

853.03

10.48%

Birla Sun Life Mutual Fund

773.44

9.50%

UTI Mutual Fund

700.57

8.60%