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Mutual fund schemes may be classified on the basis of its structure and its investment objective.
An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity.
A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor.
Interval funds combine the features of open-ended and close-ended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices.
By Investment Objective:
The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a majority of their corpus in equities. It has been proven that returns from stocks, have outperformed most other kind of investments held over the long term. Growth schemes are ideal for investors having a long-term outlook seeking growth over a period of time.
Load Funds A Load Fund is one that charges a commission for entry or exit. if the fund has a good performance history. In a rising stock market. The Act also provides opportunities to investors to save capital gains u/s 54EA and 54EB by investing in Mutual Funds. Such schemes generally invest in fixed income securities such as bonds. The advantage of a no load fund is that the entire corpus is put to work. OTHER SCHEMES: Tax Saving Schemes These schemes offer tax rebates to the investors under specific provisions of the Indian Income Tax laws as the Government offers tax incentives for investment in specified avenues. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. That is. These are ideal for investors looking for a combination of income and moderate growth. No-Load Funds A No-Load Fund is one that does not charge a commission for entry or exit. certificates of deposit. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act. Money Market Funds The aim of money market funds is to provide easy liquidity. corporate debentures and Government securities. preservation of capital and moderate income. These are ideal for Corporate and individual investors as a means to park their surplus funds for short periods. Income Funds are ideal for capital stability and regular income. It could be worth paying the load. These schemes generally invest in safer short-term instruments such as treasury bills. commercial paper and inter-bank call money.The aim of income funds is to provide regular and steady income to investors. Special Schemes Industry Specific Schemes . Balanced Funds The aim of balanced funds is to provide both growth and regular income. the NAV of these schemes may not normally keep pace. 1961. a commission will be payable. each time you buy or sell units in the fund. no commission is payable on purchase or sale of units in the fund. Typically entry and exit loads range from 1% to 2%. That is. or fall equally when the market falls.
Its main objective is to provide smooth cash flow to the sellers. the forfeiter frees the exporter from credit and the risk of not receiving the payment from the importer. After collecting the details about the importer. forfeiter estimates risk involved in it and then quotes the discount rate. Then the exporter approaches the forfeiter to ascertain the terms of forfeiting.Industry Specific Schemes invest only in the industries specified in the offer document. forfeiting may be defined as the purchasing of an exporter’s receivables at a discount price by paying cash. Documentary Requirements In case of Indian exporters availing forfeiting facility. How forfeiting Works in International Trade The exporter and importer negotiate according to the proposed export sales contract. the forfeiting transaction is to be reflected in the following documents associated with an export transaction in the manner suggested below: . which invest exclusively in a specified industry or a group of industries or various segments such as 'A' Group shares or initial public offerings ntroduction Forfeiting and factoring are services in international market given to an exporter or seller. Index Schemes Index Funds attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50 Sectoral Schemes Sectoral Funds are those. Pharmaceuticals etc. In international trade. The basic difference between the forfeiting and factoring is that forfeiting is a long term receivables (over 90 days up to 5 years) while factoring is a shorttermed receivables (within 90 days) and is more related to receivables against commodity sales. The investment of these funds is limited to specific industries like InfoTech. The exporter then quotes a contract price to the overseas buyer by loading the discount rate and commitment fee on the sales price of the goods to be exported and sign a contract with the forfeiter. FMCG. and other necessary documents. which means to surrender ones right on something to someone else. Definition of Forfeiting The terms forfeiting is originated from a old French word ‘forfait’. Export takes place against documents guaranteed by the importer’s bank and discounts the bill with the forfeiter and presents the same to the importer for payment on due date. By buying these receivables.
as against 8085% in case of other discounting products. such as interest rate risk. Benefits to Banks Forfeiting provides the banks following benefits: Banks can offer a novel product range to clients. 2. Definition of Factoring . needs not be shown separately instead. he will be exempted from the responsibility to repay the debt. these could be built into the FOB price. Invoice : Forfeiting discount. Lower credit administration and credit follow up. normally included in the "Analysis of Export Value "on the shipping bill. stated on the invoice. Forfeiting The forfeiting typically involves the following cost elements: 1. The claim for duty drawback. if any is to be certified only with reference to the FOB value of the exports stated on the shipping bill. the exporter will spare from the management of the receivables. be more competitive in the market. Improved cash flow : Receivables become current cash in flow and its is beneficial to the exporters to improve financial status and liquidation ability so as to heighten further the funds raising capability. currency risk. interest payable by the exporter for the entire period of credit involved and deducted by the forfaiter from the amount paid to the exporter against the availised promissory notes or bills of exchange. and political risk to the forfeiting bank. Increased trade opportunity : With forfeiting. Shipping Bill and GR form : Details of the forfeiting costs are to be included along with the other details. commitment fees. Risk reduction : forfeiting business enables the exporter to transfer various risk resulted from deferred payments. Bank gain fee based income. Commitment fee. The relative costs. are reduced greatly. the export is able to grant credit to his buyers freely. such FOB price. Advance tax refund: Through forfeiting the exporter can make the verification of export and get tax refund in advance just after financing. payable by the exporter to the forfeiter ‘for latter’s’ commitment to execute a specific forfeiting transaction at a firm discount rate with in a specified time. commission insurance. Reduced administration cost : By using forfeiting . credit risk. Benefits to Exporter 100 per cent financing : Without recourse and not occupying exporter's credit line That is to say once the exporter obtains the financed fund. and thus. etc. as a result. Discount fee. which enable the client to gain 100% finance.
a financial institution which is usually a bank buys the accounts receivable of a company usually a client and then pays up to 80% of the amount immediately on agreement. factoring against medical insurance. Different Types of Factoring 1. Factoring is not possible in case of bad debts. The normal period of factoring is 90150 days and rarely exceeds more than 150 days. 6. Characteristics of Factoring 1. client’s customers are aware of the factoring agreement. Cost of factoring is always equal to finance cost plus operating cost. It is a method of offbalance sheet financing. The remaining amount is paid to the client when the customer pays the debt. It is costly. . Credit rating is not mandatory. Undisclosed In undisclosed factoring. factor undertakes to collect the debts from the customer. 3. Client has to pay the amount to the factor irrespective of whether customer has paid or not. It is offered at a low rate of interest and is in very common use. Undisclosed 1. factoring for construction services etc. 2. Examples includes factoring against goods purchased. 5. 2. The advantage of nonrecourse factoring is that continuous factoring will eliminate the need for credit and collection departments in the organization.Definition of factoring is very simple and can be defined as the conversion of credit sales into cash. In this case. Nonrecourse factoring: In nonrecourse factoring. Disclosed 2. client's customers are not notified of the factoring arrangement. Balance amount is paid to client at the end of the credit period or when the customer pays the factor whichever comes first. 4. Disclosed factoring is of two types: Recourse factoring: The client collects the money from the customer but in case customer don’t pay the amount on maturity then the client is responsible to pay the amount to the factor. Disclosed Factoring In disclosed factoring. Here.