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Mutual Fund
Mutual Fund

MUTUAL FUND CONCEPT

1. CONCEPT 

2. ORGANISATION OF A MUTUAL FUND 

3. ADVANTAGES OF MUTUAL FUNDS 

4. TYPES OF MUTUAL FUND SCHEMES 

5. FREQUENTLY USED TERMS 
 
 
CONCEPT 

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. 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 appreciation realised are shared by its unit holders in proportion to 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. The flow chart below describes broadly the working of a mutual fund:
Mutual Fund Operation Flow Chart
 
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ORGANISATION OF A MUTUAL FUND 

There are many entities involved and the diagram below illustrates the organisational set up of a mutual fund:
Organisation of a Mutual Fund
 
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ADVANTAGES OF MUTUAL FUNDS 

The advantages of investing in a Mutual Fund are:
  • Professional Management
  • Diversification
  • Convenient Administration
  • Return Potential
  • Low Costs
  • Liquidity
  • Transparency
  • Flexibility
  • Choice of schemes
  • Tax benefits
  • Well regulated
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    TYPES OF MUTUAL FUND SCHEMES 

    Wide variety of Mutual Fund Schemes exist to cater to the needs such as financial position, risk tolerance and return expectations etc. The table below gives an overview into the existing types of schemes in the Industry.
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    FREQUENTLY USED TERMS 
     
    Net Asset Value (NAV)

    Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date.
     
    Sale Price

    Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load.
     
    Repurchase Price
    Is the price at which a close-ended scheme repurchases its units and it may include a back-end load. This is also called Bid Price.
     
    Redemption Price
    Is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. Such prices are NAV related.
     
    Sales Load
    Is a charge collected by a scheme when it sells the units. Also called, ‘Front-end’ load. Schemes that do not charge a load are called ‘No Load’ schemes.
     
    Repurchase or ‘Back-end’Load
    Is a charge collected by a scheme when it buys back the units from the unitholders.
     
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    Exchanges and Depositories have mandated the updating of 6 KYC attributes (PAN, name, address, e-mail, mobile, annual income) in your Trading and Demat accounts before 31st December 2021. Please ensure details are updated in your account before the cutoff date. Accounts without the mentioned 6 KYC attributes shall be considered as non-compliant accounts.

    SEBI Regn. Nos.: INZ 000170434 DP SEBI Reg no: IN-DP-40-2015 | INH 200003026 MCX: 10275, NMCE: CL0113, NCDEX/CO/3/94 | MCX/TCM/CORP/0779 | NMCE/TCM/CORP/0010

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    Update your e-mail and mobile number with your stock broker/depository participant and receive alerts on your Registered Mobile for all debit and other important transactions in your demat account directly from CDSL on the same day. Check your securities / MF / bonds in the consolidated account statement issued by NSDL/CDSL every month.

    KYC is a one-time exercise while dealing in securities markets-once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund, etc.), you need not undergo the same process again when you approach another intermediary.

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