Mutual Fund
What is Mutual Fund??
A mutual fund is a company that brings together money from many people and invests it in stocks, bonds, or other assets. The combined holdings of stocks, bonds, or other assets the fund owns are known as its portfolio. Each investor in the fund owns shares, which represent a part of these holdings.
What are examples of mutual funds?
Some examples are: Growth funds focus on stocks that may not pay a regular dividend but have the potential for above-average financial gains. Income funds invest in stocks that pay regular dividends. Index funds track a particular market index such as the Standard & Poor’s 500 Index.
Today’s Top Mutual Funds
ICICI Prudential Regular Savings Fund - Plan - Half Yearly IDCW
₹13.2104 (+4.33%)
HSBC CRISIL IBX 50:50 Gilt Plus SDL Apr 2028 Index Fund - Direct - Growth
₹12.5369 (+3.21%)
UTI Fixed Term Income Fund Series XXXI-II (1222 Days) - Direct Plan - Annual IDCW
₹10 (+1.94%)
Nippon India Dual Advantage Fixed Tenure Fund X- Plan F- Growth Option
₹11.9817 (+3.31%)
quant Momentum Fund - Growth Option - Direct Plan
₹14.6625 (-2.27%)
Kotak Long Duration Fund - Direct Plan - Growth
₹11.2808 (+2.09%)
Reliance Interval Fund - II - Series 2 - Direct Plan - Growth Plan - Growth Option
₹12.9862 (+0.34%)
Bajaj Finserv Overnight Fund - Direct - Unclaimed less than 3 years IDCW Plan
₹1005.8621 (+0.68%)
ITI Overnight Fund - Direct Plan - Annual IDCW Option
₹1000.692 (+2.73%)
Popular Mutual Funds
Axis Bluechip Fund - Direct Plan - Growth
₹68.44 (+1.14%)
SBI Small Cap Fund - Direct Plan - Growth
₹192.6772 (+0.34%)
ICICI Prudential Equity & Debt Fund - Direct Plan - Growth
₹427.4 (+0.14%)
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What is a mutual fund and how does it work?
A mutual fund is an investment that pools money from investors to purchase stocks, bonds, and other assets. The aim is to create a diversified portfolio beyond what the average investor can build on their own. When you invest in mutual funds, professional fund managers buy securities for you
What are the DIfferent types of Mutual Fund Schemes?
Schemes according to Maturity Period A mutual fund scheme can be classified into an open-ended scheme or a closed-ended scheme depending on its maturity period.
1. Open-ended Fund/ Scheme
An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. The key feature of open-end schemes is liquidity.
2. Close-ended Fund/ Scheme
A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. 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 the units 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 i.e. either repurchase facility or through listing on stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis.
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Total Amount
₹40,722
Final amount after interest
Interest Earned
₹15,722
Schemes according to Investment Objective
A scheme can also be classified as growth scheme, income scheme, or balanced scheme considering its investment objective. Such schemes may be open-ended or close-ended schemes as described earlier. Such schemes may be classified mainly as follows:
1. Growth / Equity Oriented Scheme
The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences. The investors must indicate the option in the application form. The mutual funds also allow the investors to change the options at a later date. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time.
2. Income / Debt Oriented Scheme
The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However, opportunities of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. However, long term investors may not bother about these fluctuations.
3. Balanced Fund
4. Money Market or Liquid Fund
5. Gilt Fund
6. Index Funds
There are also exchange traded index funds launched by the mutual funds which are traded on the stock exchanges.
WHAT ARE SECTOR SPECIFIC FUNDS/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. They may also seek advice of an expert.
These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act, 1961 as the Government offers tax incentives for investment in specified avenues. e.g. Equity Linked Savings Schemes (ELSS). Pension schemes launched by the mutual funds also offer tax benefits. These schemes are growth oriented and invest pre-dominantly in equities. Their growth opportunities and risks associated are like any equity-oriented scheme.
WHAT IS A LOAD OR NO-LOAD FUND?
A Load Fund is one that charges a percentage of NAV for entry or exit. That is, each time one buys or sells units in the fund, a charge will be payable. This charge is used by the mutual fund for marketing and distribution expenses. Suppose the NAV per unit is Rs.10. If the entry as well as exit load charged is 1%, then the investors who buy would be required to pay Rs.10.10 and those who offer their units for repurchase to the mutual fund will get only Rs.9.90 per unit. The investors should take the loads into consideration while making investment as these affect their yields/returns. However, the investors should also consider the performance track record and service standards of the mutual fund which are more important. Efficient funds may give higher returns in spite of loads. A no-load fund is one that does not charge for entry or exit. It means the investors can enter the fund/scheme at NAV and no additional charges are payable on purchase or sale of units.
| Fund Schemes | Trail year 1 | Trail year 2 onwards |
|---|---|---|
| Equity and Hybrid | 0.80% – 1.70% | 0.80% – 1.75% |
| Index | 0.10% – 0.60% | 0.10% – 0.60% |
| ELSS | 0.90% – 1.75% | 0.90% – 1.75% |
| Arbitrage Funds | 0.30% – 1.10% | 0.30% – 1.10% |
| Debt | 0.05% – 1.10% | 0.10% – 1.10% |
| Liquid Fund | 0.02% – 0.90% | 0.02% – 0.90% |
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