Professional Documents
Culture Documents
Investments in securities are spread across a wide cross-section ofindustries and sectors and
thus the risk is reduced. Diversification reducesthe risk because all stocks may not move in the
same direction in the same proportion at the same time. Mutual fund issues units to the
investors
inaccordance with quantum of money invested by them. Investors of Mutualfunds are known as
unit
holders.
The profits or losses are shared by the investors in proportion to their investments. The Mutual
funds normally come out with a number of schemes with different investment objectives which
are
launched from time to time. In India, A Mutual fund is required to be registered with
Securities
and Exchange Board of India (SEBI) which regulates securities markets before it can collect funds
from the public
3. To analyze the comparative study between other lending mutual fund in the
Present market.
Average excess return on the portfolio. This is followed by Sharpe (1966) reward to
variability measure, which is average excess return on the portfolio divided by the
Henriksson (1984) reported that mutual fund managers were not able to follow
an investment strategy that successfully times the return on the market portfolio.
Again Henriksson (1984) conclude there is strong evidence that the funds market
risk exposures change in response to the market indicated. But the fund managers
investment practices” is highly analytical & thought provoking. Much research has
gone into writing of this book and hence highly useful to researchers. An attempt is
b) Magazines
c) Journals
d) Newspapers
ADVANTAGES AND DISADVANTAGES OF MUTUAL FUND
Economies of Scale - Because a Mutual fund buys and sells large amounts of
Simplicity – Buying a mutual fund is easy. Pretty well any bank has its own line of
Mutual funds, and the minimum investment is small. Most companies also have
automatic purchase plans whereby
as little as $100 can be invested on a monthly basis.
Fluctuating returns - guaranteed return. There is always the possibility that the value of
your mutual fund will depreciate. Unlike fixed-income products, such as bonds and
Treasury bills, mutual funds experience price fluctuations along with the stocks that
make up the fund. When deciding on a particular fund to buy, you need to research the
risks involved - just because a professional manager is looking after the fund, that
Cost - Mutual funds provide investors with professional management; however, it comes
at a cost. Funds will typically have a range of different fees
that reduce the overall
payout. In mutual funds the fees are classified into two categories: shareholder fees and
annual fund-operating fees.
The shareholders fees, in the form of loads and redemption fees , are paid directly by
shareholders purchasing or selling the funds. The annual fund operating fees are
charged as an annual percentage usually ranging from 1-3%. These fees are assessed
to mutual fund investors regardless of the performance of the fund. As you can imagine
, in years when the fund doesn’t make money these fees only magnify losses.
growth funds, while others are classified as small-cap or income. The SEC
requires funds to have at least 80% of assets in the particular type of investment
implied in their names. The remaining assets are under the discretion solely of
Evaluating funds - Another disadvantage of mutual funds is the difficulty they pose
for investors interested in researching and evaluating the different funds. Unlike stocks,
mutual funds do not offer investors the opportunity to compare the P/E ratio, sales
Open-ended funds: under open-ended funds investors can buy the units
of fund at any time directly from the mutual fund and can sell to the funds.
This type of funds is called open-ended because the pools of fund is open for
additional sales and repurchase. Therefore the amount of fund and number
units to the investors for a specific period. After its initial offering the
further sale are closed and cannot sale anymore. Its growth in terms of
number of shares is limited. Any further transaction for buying and selling
Unit investment trust: Unit investment trusts (UITs) are issued to the
public only 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
termination. Less commonly, they can sell their shares in the open market.
CLASSIFICATION OF FUNDS BY TYPES OF
UNDERLYING ASEETS
1.Money market mutual fund: these funds are invested in short term assets
price equal to the assets value plus other charges and expenses. These funds
2. Balanced funds: Those mutual funds which invest both in equity and
Debts are called balanced fund. It aims at distributing regular income as well
as capital appreciation.
3.Equity funds: Equity funds are those funds which invest a large shares of
4.Load funds and non load funds: Investment management charge fee
from managing funds and impose certain expenses. These expenses are
called load. A loading fee is usually charge from the initial purpose. The fee
is added to the NAV of units. Such mutual funds are called load mutual
fund.
If no load fees is charged, it is called ‘non load mutual funds’. Non load
5.Real estate mutual fund: The REMF scheme is a mutual fund scheme
property.
EVALUATING PORTFOLIO PERFORMANCE
Evaluate the track record against similar funds. Success in managing a small or in
a fund focusing on a particular segment of the market cannot be relied upon as an
evidence of anticipated performance in managing a large or a broad based fund.