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What is a Mutual Fund?

A mutual fund can be said to be a financial trust in which many investors pool their funds keeping in mind a predetermined objective of investment. After collecting the funds they are invested in various instruments of the capital market like securities, shares and debentures. This pool of money is managed and monitored by an expert who by studying the market conditions invests the money into certain specific securities. The gains thus earned by the investments are shared between the different security holders in proportion to the units of shares held by them. Currently investing in Mutual funds is considered to be one of the most beneficial forms of investments available in the Indian investment industry in comparison to the other investments instruments. Mutual funds are extremely cost efficient and also carry a low level of risk.

List of mutual fund companies in India

Below is a list of some of the best mutual fund companies in India :

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ABN AMRO Mutual Fund HDFC Mutual Fund HSBC Mutual Fund Alliance Capital Mutual Fund Chola Mutual Fund Birla Sun Life Mutual Fund Bank of Baroda Mutual Fund (BOB Mutual Fund) Tata Mutual Fund Escorts Mutual Fund Kotak Mahindra Mutual Fund Franklin Templeton India Mutual Fund Morgan Stanley Mutual Fund India Canbank Mutual Fund Prudential ICICI Mutual Fund Sahara Mutual Fund State Bank of India Mutual Fund Unit Trust of India Mutual Fund Reliance Mutual Fund ING Vysya Mutual Fund Standard Chartered Mutual Fund Benchmark Mutual Fund LIC Mutual Fund GIC Mutual Fund

Types of Mutual Fund Schemes

Open - Ended Schemes The best thing about an open ended scheme is liquidity. Open-end fund subscriptions are generally available throughout the year. They do not have a fixed date of maturity. Investors can buy and sell share units as and when they feel. Close - Ended Schemes Close ended schemes come with a pre-determined maturity period. Investors can directly invest the open ended scheme during the initial issue. There are two types of exit options in this kind of schemes depending on the type of the scheme. Interval Schemes Interval Schemes are a combination of both open-ended and close-ended schemes. In case of interval schemes you can trade the units directly on the stock exchange or redeem them at the NAV related rates.

Advantages and Disadvantages of investing in mutual funds

For investments in mutual fund , one must keep in mind about the Pros and cons of investments in mutual fund.

Advantages of Investing Mutual Funds

Professional Management - The biggest advantage of investing in mutual funds is that they are managed by qualified and professional expertise. Since most people are busy these days they do not have the time to monitor and manage their investment portfolios. However incase of mutual funds investors are relaxed that their funds are in safe hands. Diversification - Investing in mutual funds does not require the investor to buy individual bonds and stocks he purchases units of different mutual funds thereby spreading the amount of risk. In this way his risk gets minimized to a great extent. By investing in different assets the investor is sure that if he incurs losses in any particular fund then he might gain from another investment. Liquidity - By investing in mutual funds you can liquidate your investment as and when you like. Simplicity - Investing in mutual funds is very easy and simple when compared to the other instruments available in the investment market. Investing in mutual funds also does not require large amounts of money as you can start with a minimum Rs.50 per month.

Disadvantages of Investing Mutual Funds

Professional Management- Some of the mutual fund managers are not experienced enough and so they do not explore all the available opportunities in the market. Costs - When an investor purchases a unit of a mutual fund then he is charged an entry load which is actually an

extra cost that the investor is paying. Also when the investor is exiting from the mutual fund he is again charged an extra cost as exit cost. Dilution - Dilution is the direct result of diversification. Since investors have their money spread across different assets the high returns earned do not make much of a difference. Taxes - Tax is something that is most often ignored by the mutual fund manager. When the mutual fund manager sells a particular security it triggers the tax of the individual thereby almost nullifying the tax saving in mutual funds investment.

The Organization of a Mutual Fund is how the mutual funds are controlled. A number of entities are involved in the Organization of a Mutual Fund. This helps in the proper management of the mutual fund portfolio.

The Organization of a Mutual Fund contains entities such as

Mutual Fund Shareholders: The Mutual Fund Shareholders, like the other share holders have the right to vote. The voting rights include, the right to elect directors during the directorial elections, voting right to approve the alterations investment advisory contract pertaining to the fund and provide approval for changing investment objectives or policies. Board of directors: The Board of directors supervise the functional activities, which include approval of the contract Asset Management Company and other various service providers. Investment management company or Asset Management Company: This body handles the mutual fund portfolio as per the objectives and policies mentioned in the prospectus of the mutual funds. Custodians: The custodians protect the portfolio securities. Mostly qualified bank custodians are used for mutual funds. Transfer Agents: The transfer agent for the purpose of maintaining records and similar functions. The maintenance of the shareholder's accounts, calculation of dividends to the be disbursed, sending information to the shareholders about the account statements, notices, and income tax information. Some of the transfer agent sends information to the share holders about the shareholder transactions and account balances. They also maintain customer service departments in order the cater to the queries of the shareholders. SEBI: The primary aim of the Securities Exchange Board of India is to protect the interest of the mutual fund investors. The SEBI has formulated several policies for better functioning and controls the mutual funds. In the year 1993, SEBI issued guidelines pertaining to the mutual funds. All mutual funds, private sector and public sector are regulated by the guidelines of the SEBI. The Asset Management Company managing the funds has to be approved by the SEBI.

The Advantages of Mutual Funds encourage investors to invest in the same. The Mutual funds are very popular among investors as it is professionally managed and it offers a wide variety of advantages.

Advantages of Mutual Funds

The Mutual Funds are one of the best financial instruments offered to the public by the finance corporations. The Mutual Funds are collective investments, and use that money as investment in various stocks, bonds, and other securities to earn interest and disburse dividends.Advantages of Mutual Funds are the primary reason for the popularity of the mutual funds. The Mutual Funds offers easy access to invest in the complex financial market. Major advantages of Mutual Funds are professional management, diversification and liquidity.

Advantages of Mutual Funds-Overview

Flexibility: The investments pertaining to the Mutual Fund offers the public a lot of flexibility by means of dividend reinvestment, systematic investment plans and systematic withdrawal plans. Affordability: The Mutual funds are available in units. Hence they are highly affordable and due to the very large principal sum, even the small investors are benefited by the investment scheme. Liquidity: In case of Open Ended Mutual Fund schemes, the investors have the option of redeeming or withdrawing money at any point of time at the current rate of net value asset. Diversification: The risk pertaining to the Mutual Funds is quite low as the total investment is distributed in several industries and different stocks. Professional Management: The Mutual Funds are professionally managed. The experienced Fund Managers pertaining to the Mutual Funds examine all options based on research and experience. Potential of return: The Fund Managers of the Mutual Funds gather data from leading economists and financial analysts. So they are in a better position to analyze the scopes of lucrative return from the investments. Low Costs: The fees pertaining to the custodial, brokerage, and others is very low. Regulated for investor protection: The Mutual Funds sector is regulated by the Securities Exchange Board of India (SEBI) to safeguard the rights of the investor.

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The Drawbacks of Mutual Funds are the major obstacles for the growth of the same. Management risks, trading limitations and absence of taxes are some of the major drawbacks of mutual funds.

The Drawbacks of Mutual Funds

Fees and commissions: The Mutual funds charge administrative fees to meet the daily expenses. Many funds charge brokerage or 'loads' to pay financial planners or financial consultants, brokers. In case a shareholder does not use the services of financial adviser, he still has to pay a sales commission.

No Guarantees: All investments bear risk factors. The Mutual Funds are no different. It depends on the stock market. A fall in the stock market would trigger a fall in the value of the mutual fund shares. Although the risk factor pertaining to Mutual funds are much lower compared to Mutual Funds.

Inefficiency of Cash Reserves: The Mutual Funds maintain big cash reserves, for situations such as a number of large withdrawals. The investors are provided with liquidity, and a major portion of the financial resources is maintained as cash, and it is not invested in some assets.

Management risk: The investment pertaining to the Mutual Funds depends on the fund manager and his selection of the mutual fund portfolio, which is based on speculation. If things do not go as expected, the investments may not earn enough money. Taxes: The proceeds from the sale of mutual funds are taxable, even if the same is reinvested in mutual funds. No Insurance: The Mutual funds are regulated by the central government. However mutual funds are still not insured against losses. Trading Limitations: The Mutual Funds usually have high liquidity, but most of the mutual funds, such as open-ended funds, are bought or sold at the end of the day. Loss of Control: In case, if the mutual funds are managed by the investor himself, the portfolio management may go bad and have an adverse effect on the earnings from the investment.

The Future of Mutual Funds In India suggests that the industry has got huge scopes of development in the times to come. The Future of Mutual Funds In India is quite bright. Mutual Funds are one of the most popular forms of investments as these funds are diversification, professional management, and liquidity. In the year 2004, the mutual fund industry in India was worth Rs 1,50,537 crores. The mutual fund industry is expected to grow at a rate of 13.4% over the next 10 years.

Mutual Fund Assets Under Management (MF AUM)-Growth

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In March 1998, the MF AUM was ` 68984 crores. In March 2000, the MF AUM was ` 93717 crores and the percentage growth was 26 %. In March 2001, the MF AUM was ` 83131 crores and the percentage growth was 13 %. In March 2002, the MF AUM was ` 94017 crores and the percentage growth was 12 %. In March 2003, the MF AUM was ` 75306 crores and the percentage growth was 25 %. In March 2004, the MF AUM was ` 137626 crores and the percentage growth was 45 %. In September 2004, the MF AUM was ` 151141 crores and the percentage growth was 9 % in 6 months time. In December 2004, the MF AUM was ` 149300 crores and the percentage growth was 1 % in 2 months time.

Future of Mutual Funds In India-Facts on growth

Important aspects related to the future of mutual funds in India are -

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The growth rate was 100 % in 6 previous years. The saving rate in India is 23 %.

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There is a huge scope in the future for the expansion of the mutual funds industry. A number of foreign based assets management companies are venturing into Indian markets. The Securities Exchange Board of India has allowed the introduction of commodity mutual funds. The emphasis is being given on the effective corporate governance of Mutual Funds. The Mutual funds in India has the scope of penetrating into the rural and semi urban areas. Financial planners are introduced into the market, which would provide the people with better financial planning.

The Mutual Fund Investment is a popular mode of investment due to its advantages for it is managed professionally. There are different types of mutual funds offering various advantages to investors.

Mutual Fund Investment - At a Glance

The Mutual Fund Investment is a kind of financial instrument offered to the public by the finance corporations. They are resourcefully managed collective investments which gather money from different investors and use it as investment in various stocks, short-term money market financial instruments, bonds and other securities to earn interest and distribute it as dividends.

Mutual Fund Investment - Types

Investments can be undertaken in the following types of mutual funds -

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Open-end fund Equity funds Exchange-traded funds Funds of funds Bond funds Money market funds Hedge funds

Mutual Fund Investment - Benefits

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The risk pertaining to the Mutual Funds is quite low as the total investment is distributed in several industries and different stocks. The Mutual funds are available in units so it is highly affordable due to the very large principal sum. The fees pertaining to the custodial, brokerage and others are very low. The investments pertaining to the Mutual Fund offers the public a lot of flexibility by means of dividend reinvestment, systematic investment plans and systematic withdrawal plans. The Mutual Funds sector is regulated by the SEBI to safeguard the rights of the investor The Fund Managers pertaining to the Mutual Funds gather data from the leading economists and financial analysts, so they are better equipped to analyze the scopes of lucrative return from the investments

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In case of Open Ended Mutual Fund schemes, the investors have the option of redeeming or withdrawing money at any point of time at the present rate of net value asset The Mutual Funds are professionally managed. The experienced Fund Managers pertaining to the Mutual Funds examine all options based on research and experience

Mutual Fund Investment Opportunities

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Opportunities of future expansion are very high. Corporate governance of Mutual Funds is being given emphasis. The Mutual funds in India has the scope of penetrating into the rural and semi urban areas. The Securities Exchange Board of India has allowed the introduction of commodity mutual funds A number of foreign based assets Management Company are venturing into Indian markets.

Best Mutual Funds are selected on the basis of specific characteristics of a mutual fund. Performance, management and administrative fees are the major considerations in selecting best mutual funds. The Best Mutual Funds are sorted out with the help of the characteristics the mutual funds. Choosing the Best Mutual Funds needs vivid knowledge about the features and concepts of the Mutual Funds.

Best Mutual Funds - Selection

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The selection of Mutual Funds is highly critical for various reasons The Mutual Fund are investments in multiple securities Every single share of a mutual fund is like a small investment in thousands of stocks and bonds The advantages of the mutual funds are that they allow small investors to put their money in a large variety of securities The Mutual Funds charges administrative fees to all the shareholders, which becomes a discouraging factor for small investors

Best Mutual Funds - Characteristics

Low administrative fees: The administrative fees, front-end loads, and management fees are some of the fees charged on the investments. These fees considerably lower the return from investments. In case the performance varies, the fees remain constant. It is wise to invest in a mutual fund with low administrative fees rather than a mutual fund which is performing superbly for the past three to four years.

Experienced management: The Fund Manager pertaining to the Mutual Funds, also referred as the portfolio manager trades, realizes the capital losses and gains, and collects the income in form of interest. A lot depends on the manager, as one who is inexperienced without any previous record of performance may deliver well, but there is guarantee, whereas a manager with a performance record has proved his worth.

Above average performance: Investors look for mutual funds, which have preformed well for the past three to four years, but the problem is that there is no guarantee that it would perform in the same manner at present. It is wiser to invest in those funds which have performed better than those having higher returns. y The Ways to Invest in Mutual Funds in India suggests the potential options of lucrative investments in the country. Different ways of investing in mutual funds in India cater to different kinds of investors with different objectives of investment.

y The Investment scenario in India is changing and developing on a day to day basis. Mutual funds have
become one of the most popular forms of investment. The options pertaining to investments which were previously very popular, such as fixed deposits, bonds, etc, lost its charm. Though the stock market is a good investment option, but the risk factor associated with it is huge, so it is not a very popular investment option.

Ways to Invest in Mutual Funds in India - Facts

Mutual funds stand out as a lucrative investment option at present. The popularity of the mutual funds is due to the facilities they provide. The advantages of the mutual funds are flexibility, affordability, liquidity, diversification, professional management, potential of return, transparency, low administrative costs, decent returns, and more over small investors can also invest in the mutual funds. The mutual funds offer schemes for all kinds of investors. The investors have the option of choosing between equity funds which bear little higher risk factors, balance funds which bear slight risk, debt funds which bear high risk. Cash Funds or short term floating rate funds do not bear any risk factor. The several schemes of the mutual funds cater to different needs of the investors. A person who needs cash within a short time span may invest in cash fund. A short-term bond fund would be helpful for a person who expects a return on investment in 6 - 12 weeks. An equity fund or income fund is for a person who expects returns in a year's time. Within the different categories there are different funds such as mid-cap funds, blue chip funds, opportunity funds, sectoral funds, dividend yield funds within the equity funds. The several ways to Invest in Mutual Funds in India, helps people to customize their investment portfolio according to their need. Classification of Mutual Funds in India is done on the basis of their objective and structure. Classification of Mutual Funds in India has helped to categorize them into major types such as Funds of Funds, Regional Mutual Funds, Closed- End Funds, Large Cap Funds, and Interval Funds.

A glance at Mutual fund in India:

Mutual fund in India is a kind of collective investment that is managed professionally. In Mutual fund in India, the money is collected from a large number of investors and then it is invested in bonds, stocks, and various other securities. The fund manager of Mutual fund in India collects the interest income which is then distributed among the individual

investors on the basis of the number of units that they hold. Mutual fund's value of a share is calculated on a daily basis and is known as per share Net Asset Value (NAV).

Various kinds of Mutual funds in India:

Classification of Mutual Funds in India has been done on the basis of their investment objective and structure. Classification of Mutual Funds in India has be done into main types such as Income Funds, Sector- Specific Funds, Large Cap Funds, Fixed- Income Funds, Interval Funds, Closed- End Funds, and Tax Saving Funds. Income Funds in India are a kind of mutual fund whose aim is to provide to the investors with steady and regular income. They usually invest their principal in securities such as corporate debentures, bonds, and government securities. Sector- Specific Funds in India are funds that make investments in specified sectors only. They give importance to one sector only such as pharmaceuticals, software, infrastructure, and health care. Large Cap Funds in India are a kind of mutual fund that makes investment in the shares of large blue chip companies. Fixed- Income Funds in India makes investment in debt securities that have been issued either by the banks, government, or companies. They are also known as income funds and debt funds. Interval Funds in India are a combination of both the open and close ended funds. They offer the investors flexibility for they can be sold and repurchased at the period of time that has been predetermined. Closed- End Funds in India are a kind of mutual fund that has a maturity period that has been specified and which usually varies from three to fifteen years. Tax Saving Funds in India offer tax rebates to the investor under the Section 88, Income Tax Act. They are also known as equity- linked savings scheme.

Classification of Mutual Funds


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Interval Funds Income Funds Tax Saving Funds Sector-Specific Funds Fixed-Income Funds Closed-End Funds Open-End Funds Large Cap Funds Mid-Cap Funds Equity Funds Balanced Funds Growth Funds No Load Funds Exchange Traded Funds Value Funds Money Market Funds International Mutual Funds Regional Mutual Funds Sector Funds Index Funds Fund of Funds

Interval Funds
Meaning of Interval Funds in India:

Interval Funds in India combine the characteristics of both the close ended funds and open ended funds. This means that Interval Funds in India can be repurchased and sold at the time that has been predetermined. Interval Funds in India are usually repurchased every six or twelve months or as has been unveiled in the annual report and prospectus of the fund. Interval Funds in India are sold and repurchased at the prices that are related to the Net Asset Value (NAV).

Advantages of Interval Funds in India:

The advantage of Interval Funds in India is that it allows the investor more flexibility than the close ended funds for he can sell it at the predetermined time. Further the advantage of Interval Funds in India is that it ensures that the investor has liquidity of capital at regular intervals of time.

Mutual Fund companies that have launched Interval Funds in India are:

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Birla Sun Life Mutual Fund Prudential ICICI Mutual Fund ABN-AMRO Mutual Fund

Meaning of Income Funds in India:

Income Funds in India usually invest their principal in companies that give high payouts of dividends and also in securities of fixed income such as corporate debentures, government securities, and bonds. The advantage of Income Funds in India is that it provides regular income to the investor either on a monthly or quarterly basis. Further the advantage of Income Funds in India is that it also provides stability of capital to the investor. Income Funds share prices are not fixed for they have a tendency to grow with the fall in interest rates and fall with the rise of the interest rates. The bonds that are there in Income Funds are usually of the investment grade. The other bonds are of such credit quality that they assure the protection of the capital.

Mutual fund companies that have launched Income Funds in India are:

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Prudential ICICI Mutual Fund HDFC Mutual Fund Reliance Mutual Fund Birla Sun Life Mutual Fund

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Franklin Templeton India Mutual Fund Tata Mutual Fund

Meaning of Tax Saving Funds in India:

Tax Saving Funds in India offer to the investors rebates in taxes under the Income Tax Act, Section 88 and they are also known as equity-linked savings schemes. Tax Saving Funds in India usually have a period of lock- which is generally of three years. As a result of this, the manager of the fund is not concerned about factors such as the pressures of redemption, performance of the fund during a short time, and thus does his job by keeping in view the long term goal. The fund manager of the Tax Saving Funds in India invests the money in instruments that are related to equity. Tax Saving Funds in India are suitable for those investors who want to increase their investments and also want to benefit from the rebates in taxes. The advantage of Tax Saving Funds in India is that they grant the investors an opportunity to make investments in an avenue that is market- linked and at the same time claim benefits in taxes. The dividends that are earned in Tax Saving Funds in India are tax free.

Major Tax Saving Funds in India are:

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Franklin India Tax Shield HDFC Tax Saver Sundaram Tax Saver HDFC Long Term Advantage Prudential ICICI Tax Plan Birla Equity Plan UTI Equity Tax Savings Tata Tax Saving Fund Magnum Tax Gain

Definition of Sector- Specific Funds in India:

Sector- Specific Funds in India are those funds that make investments only in those industries or sectors that have been specified in the prospectus of the funds. Sector- Specific Funds in India usually make investments in sectors such as power, pharmaceuticals, petroleum, and technology. The amount of returns that Sector- Specific Funds in India give depends totally on the performance of the industries or sectors in which investments have been made. Sector- Specific Funds in India give very high returns but at the same time they are also very risky in comparison to the funds that are diversified. This is the reason that the investors that have invested in Sector- Specific Funds in India need to carefully watch the operation of those industries or sectors and then at the correct time make an exit.

Main mutual fund companies that have launched Sector- Specific Funds in India are:

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Prudential ICICI Mutual Fund Birla Sun Life Mutual Fund Franklin Templeton India Mutual Fund Unit Trust of India Mutual Fund

Fixed- Income Funds in India are a kind of mutual fund which makes investment in debt securities that have been issued either by the companies, banks, or government. Fixed- Income Funds in India are also known as debt funds and income funds.

Major fund houses that have launched Fixed- Income Funds in India are:

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Sundaram BNP Paribas Mutual Fund Franklin Templeton India Mutual Fund Fidelity Fund Management Reliance Mutual Fund

Closed- End Funds in India have a specified period of maturity which varies between three to fifteen years. The investors can make investments in Closed- End Funds in India during the period of public offer or they have to buy the units of the funds from the stock exchanges.

Closed- End Funds in India:

Closed- End Funds in India have a fixed period of maturity which can vary between three to fifteen years. ClosedEnd Funds in India can be subscribed to only during the period of time that has been specified. Investors can make investments in Closed- End Funds in India either during the period of public offer or buy the funds from the stock exchanges. In Closed- End Funds in India, the number of shares that are sold in the public offer is fixed and after this the selling and buying of the units are possible only in the stock exchanges. Certain Closed- End Funds in India repurchase the units periodically at related prices of Net Asset Value (NAV) in order to provide the investors an exit route.

Major Closed- End Funds in India are:

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UTI Wealth Builder HDFC Long-Term Equity Standard Chartered Enterprise Equity Franklin India Smaller Companies Birla Long-Term Advantage Tata Capital Builder ING Vysya C.U.B. Prudential ICICI Fusion Tata Equity Management

Open- End Funds in India is a kind of mutual fund that can be sold and purchased all through out the year. OpenEnd Funds in India have no fixed date of maturity. The investors buy and sell Open- End Funds in India at related prices of Net Asset Value (NAV).

An overview of Open- End Funds in India:

Open- End Funds in India is such that the investors can sell as well as buy all through out the year. The investors sell and buy units of Open- End Funds in India at the related prices of Net Asset Value (NAV) each day. An investor can buy Open- End Funds in India either from a brokerage house or through the mutual fund company. Open- End Funds in India have no fixed date of maturity. The main advantage of Open- End Funds in India is that it offers liquidity to the investors for they can sell the units whenever they need the money.

Major Open- End Funds in India are:

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UTI Gold Exchange Traded Fund Standard Chartered Premier Equity Fund Sahara Mid- Cap Fund Lotus India Tax Plan Reliance Tax Saver (ELSS) Fund Canara Robeco Equity Tax Saver- 93 DSP Merrill Lynch Tax Saver Fund Tata Life Sciences and Technology Fund JM Arbitrage Advantage Fund Kotak Gold ETF

Large Cap Funds in India are a kind of mutual fund which makes investments mainly in the shares of big companies. The investors prefer to make investments in Large Cap Funds in India for they are considered to have lower levels of risks and this ensures that their money is safe.

A glance at Large Cap Funds in India:

Large Cap Funds in India are a kind of mutual fund that looks for appreciation of capital by investing mainly in the shares of companies that are big blue chip. The big blue chip companies in which Large Cap Funds in India make their investments have above- average potential for growth in earnings. The large cap companies in which Large Cap Funds in India makes investments are usually companies that have a market capitalization that is more than ` 1000 crores. The main advantage of Large Cap Funds in India is that they are considered to be of low return and low risk category. This ensures that the investments of the investors are relatively safe.

Major Large Cap Funds in India are:

Franklin India Blue Chip

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DSPML Top 100 Equity HDFC Top 200 Principal Large Cap Fund Reliance Growth Fund Kotak 30 UTI Large Cap Fund

Mid-cap funds are a special type of mutual fund wherein, the corpus accumulated is invested in small or medium sized companies. With the rise of large caps the heavy weight investors like the mutual funds and Foreign Institutional Investors are increasingly investing in mid cap funds.

Definition and features of the Mid-Cap Funds:


Mid-cap funds are a special type of mutual fund wherein, the corpus accumulated is invested in small or medium sized companies. In the absence of any standardized definition or definite classification of small or medium sized company, each mutual fund classifies small and medium sized companies according to its own policies. In general, companies with a market capitalization up to ` 500 crores are regarded as small and companies with a market capitalization over ` 500 crores but below ` 1,000 crores are defined as medium sized by the mutual fund industry. Mid-cap funds bear high risk factors and thus offer high returns in case of positive movements of the indexes. Further, opportunity of investment in Mid-cap funds is high due to low identification factor in the market. Another important feature of these Mid-Cap Funds is that they tend to grow in size as more investors gets involved. The net effect is that, huge amount of money are invested against few stocks. Experts are of the opinion that investments in Mid-Cap Funds should follow investment patterns of sectoral funds and one should not focus only on these funds alone. Further, investment in Mid-Cap Funds should have long term perspective. With the rise of large caps the heavy weight investors like the mutual funds and Foreign Institutional Investors are increasingly investing in mid cap funds. However investment in Mid-cap funds should be undertaken with caution since these tend to be volatile because of the high risk involved. Equity funds or also called stock mutual funds are a special type of mutual fund wherein, the corpus accumulated through this fund is invested in stocks of public companies. The operation of the Equity Funds is regulated by the Association of the Mutual Funds of India (AMFI).

Definition and features of the Equity Funds:


Equity funds also known as stock mutual funds are a special type of mutual fund wherein, the corpus accumulated through this fund is invested in stocks of public companies. Holding of stocks or equity in a company means having part ownership or equity in that particular company. The main objective of holding stocks of a company is to reap profit on investment in such stocks after the company makes a profit in its business. These stocks are generally classified as small, medium, and large sized stocks, which is further defined according to their individual market capitalization. The equity managers are trained professionals who format and pick stocks for investments. The formation of equity portfolios are generally made either by applying value-approach or by growthapproach. In the value-approach method the stocks with lesser value than its competitors are picked and in the growth-approach method the stocks with higher growth opportunity than its competitors or markets are picked for

investments. In another type of approach, both the value and growth based stocks are picked for investments.

Balanced funds also known as the hybrid funds wherein, the corpus accumulated is invested in combination of common stock, preferred stock, bonds, and short-term bonds. The balanced funds provide the investors with an opportunity to invest in a single mutual fund that offers growth and income at the same time.

Definition and features of the Balanced Funds:


Balanced funds also known as the hybrid funds wherein, the corpus accumulated is invested in combination of common stock, preferred stock, bonds and short-term bonds. In other words, it is a combination of many stocks and bonds, which is structured to strike a balance of income and capital appreciation. This combination is essentially done to minimize the risk involved in such investments. Thus, the balanced funds provide the investors with an opportunity to invest in a single mutual fund that offers growth and income at the same time. The stocks meet the growth requirements and the bonds meet the income requirements. Further, this combination helps to negate any fall in the value of the stocks in the financial market. Growth Funds are special type of mutual funds, the objective of which is to achieve capital appreciation by investing in growth stocks. The rise of the Growth Funds in recent years can be attributed to the rise in value of growth stocks in the Indian mutual fund market.

Definition and features of the Growth Funds:


Growth Funds are special type of mutual funds, the objective of which is to achieve capital appreciation by investing in growth stocks. Generally, the corpus accumulated in the Growth Funds is invested in stocks of those companies, which are registering prominent earnings or revenue growth. In other words, the growth funds focus on the fastestgrowing companies in the market. One of the significant features of the Growth fund is that it offers tremendous growth, when the financial market is bullish. Market trend shows that investments in these growth funds are generally made by aggressive investors.

Investments in No Load Funds are devoid of commissions. No Load Funds have gained in popularity over the years.

Definition and features of the No Load Funds:

The mutual funds in India are broadly classified as Load funds and No load Fund. Out of the basic two types of mutual funds - the investment in No Load Funds does not attract any commission for such investments. In other words, No Load Funds can be bought without paying any commission. Another most significant feature of the No Load Funds is that it can be held for a longer term and the proceeds are generally reinvested further. Furthermore, the profit accrued by investing in No Load Funds shows the exact profit earned on such investments. The Chapter III of the Income Tax Act, 1961 provides tax exemption on investment on No Load Funds. With the rise of the Indian mutual fund market, the popularity of no load funds has increased considerably much to the satisfaction of the fund managers.

Authorities to the No Load Funds in India:


The No Load Funds in India operates according to the guidelines laid down by the Association of Mutual Funds of India (AMFI). Further, the Association of Mutual Funds of India (AMFI) operates in accordance with the laid down guidelines of the Securities and Exchange Board of India (SEBI).

Definition and features of the Exchange Traded Funds

Exchange traded funds popularly also known as ETFs, is a type of mutual fund wherein, the corpus is invested in a basket of securities, which is being traded on an exchange. Further, an Exchange traded fund investments are being made either on all the securities or on a sample of the representative securities that are being traded in the said index.The exchange traded funds employ the process of arbitration during trading, in order to keep its trading value in sync with the values of the underlying stocks, which makes up the portfolio. All the Exchange Traded Funds in India are regulated by the Association of Mutual Funds of India (AMFI). Further, the Association of Mutual Funds of India (AMFI) operates in accordance with the laid down guidelines of the Securities and Exchange Board of India (SEBI). The Chapter III of the Income Tax Act, 1961 provides tax exemption on investment on Exchange Traded Funds. The rise of the Indian capital markets and increasing numbers of exchange has propelled the growth in the numbers of Exchange traded funds in India.

Exchange Traded Funds - advantages


One of the striking features of the Exchange Traded Funds is that they are not volatile like other mutual funds and thus remain much more stable during bearish market. Further, Exchange Traded Funds cost less and are transparent. Furthermore, these funds can be traded and as well as diversified simultaneously. Value funds focus on safety of investments rather than on growth. Value funds offer long term growth of capital.

Definition and features of the Value Funds:


Amongst the wide variety of mutual funds are available in India, value funds is a type of mutual fund wherein the main focus is on the safety of the investment and not on the growth of the investment made on such funds. Value funds represent stocks of mature companies, whose growth has become stagnant. Further, these stocks of the value funds utilize their earnings to pay off dividends to the investors. One of the typical characteristics of the value fund is that, they generate income from the dividends and they also offer long term growth from capital appreciation. The returns on Value funds are more conservative in nature. Another important feature of the value funds is that, they invest in stocks of companies that have lesser appeal to the mainstream investors and the stocks have lost its sheen. The value funds in India operate as per the guidelines of according to the guidelines laid down by the Association of Mutual Funds of India (AMFI) and Securities and Exchange Board of India (SEBI). The value funds offer tax

exemption on value fund investments according to Chapter III of the Income Tax Act, 1961.

The Money market instruments that are being used to structure the money market mutual funds are highly liquid debt instruments like the treasury bills. The Association of the Mutual Funds of India (AMFI) and the Securities and Exchange Board of India (SEBI) have been instrumental in introducing the wide array of mutual funds in the Indian capital market. Individuals and companies invest in mutual funds with the expectation of appreciation of the capital invested in these companies. Mutual funds are of various types and are structured according to the risk bearing factor of the investors. The opening up of the Indian economy brought about the generation of a number of special types of mutual funds in India. The Association of the Mutual Funds of India (AMFI) and the Securities and Exchange Board of India (SEBI) have played an active role in introducing various types of mutual funds in the Indian capital market. One such type of fund called the money market fund was essentially structured to capitalize on the growth of money market instruments.

Definition and features of the Money Market Funds:


Money Market Funds is a special type of mutual fund that invests in the money market instruments only. The Money market instruments that are being used to structure the money market mutual funds are highly liquid debt instruments like the treasury bills. These Money market funds generally bear less risk and are regarded as the safest type of mutual funds. The main objective of investment in a money-market fund is to safeguard principal investment while earning a modest return on such investments. In other words, investments in a Money-market mutual fund are similar to a high-yield bank account with a decent risk factor. Caution should be exercised with respect to the interest rate that is being offered while investing in a money-market fund. International mutual funds are a very special type of mutual fund, wherein investments are being made in the nondomestic securities markets. In recent years the number of International Mutual Funds operating in the Indian mutual fund market has gone up in India. The growth of the Indian mutual fund market can be credited to its regulatory body - the Association of the Mutual Funds of India (AMFI), which is under the control of the Securities and Exchange Board of India (SEBI). The Indian financial market went through a paradigm shift of growth and maturity during the economic liberalization of the Indian economy during the early 1990s.Funds like the International Mutual Funds grew very popular along with the other types of mutual funds, in the last few years. Any individual or company can invest in these types of funds to capitalize on the difference in growth of international financial market. In recent years the number of International Mutual Funds operating in the Indian mutual fund market has gone up.

Definition and features of the International Mutual Funds:


International mutual funds are a very special type of mutual fund, wherein investments are being made in the nondomestic securities markets across the world. The popularity of the International mutual funds has gone up in the recent years since it provides a high level of diversification of the portfolio. Further, the International mutual funds also help in capitalizing on some of the world's best opportunities. International mutual funds can offer its investors with high returns if chosen properly. One of the significant features of the International mutual funds are that it accrues

profit when some markets are rising and others are falling in the international market. A strict vigil on the foreign currencies and world markets is needed while investing in the International mutual funds.

The Regional Mutual Fund as the name suggests, is a special type of mutual fund, wherein the investment is made in such funds that are confined to the securities from a specified geographical region. The development of a particular region for industrialization, especially for the setting up of Special Economic Zones or Export Oriented Units necessitated huge inflow of funds and subsequently structuring special funds to attract region specific investment. Presently, the Indian Mutual fund market consists of a variety of funds. The rise of the Indian mutual fund market was recorded after the economic reforms were undertaken by the government of India. The meteoritic rise of the Indian capital market after the 1990s was the effect of shift of Indian market from closed to open-market policy. The growth of the Indian Industry saw huge inflow of funds, both from domestic private and foreign sources. This further propelled the growth of the Indian infrastructure and real estate industry. The development of particular region for industrialization, especially for the setting up of Special Economic Zones or Export Oriented Units necessitated huge inflow of funds and subsequently structuring special funds to attract region specific investment. The Association of the Mutual Funds of India (AMFI) came up with Regional Mutual Funds to fill the void of region specific funds. The Regional Mutual Funds grew very popular along with the other types of mutual funds in the recent years.

Definition and features of the Regional Mutual Funds:


The Regional Mutual Fund as the name suggests, is a special type of mutual fund, wherein the investment made in such funds are confined to the securities from a specified geography. In other words, the investments made in the Regional Mutual Fund are dependent on the geographical origin of the fund. The most important feature of this fund is that it invests in portfolio of companies operating in a particular geographical area. The main objective of investing in the Regional Mutual Funds is to take leverage of the geographical growth of that particular area. These funds are created on regions which are supposed to undergo tremendous modernization. The Regional Mutual Funds picks up securities that are not confined to geographical criteria. Sector Funds invest in a single type of industry, or in other words, a single sector. Sector funds can be highly profitable.

Definition and features of the Sector Funds:


The Sector Funds are those types of mutual funds which accumulate stocks of particular sector. In other words sector funds invest in a single type of industry, like Information Technology, Telecommunication, Pharmaceuticals, Infrastructure, etc. The Sector Funds are structured in this particular manner in order to take advantage of growth of particular type of industry. The Sector Funds can offer tremendous profit to the investor if the funds are carefully chosen. The authorities to the Sector Funds in India are the Association of Mutual Funds of India (AMFI), which operates in

accordance with the laid down guidelines of the Securities and Exchange Board of India (SEBI). Moreover, investments in Sector Funds offer tax exemptions to the investors (Chapter III of the Income Tax Act, 1961). With the growth of the Indian industries the financial markets have undergone tremendous transformation. The rise of different sectors has necessitated structuring of sector specific funds to attract substantial amount of money for the growth of a specific sector in India. The Securities and Exchange Board of India (SEBI) played a pivotal role in the rise of the capital markets of India. SEBI's role for the development of the mutual fund industry of India was exemplary. Today, the Association of Mutual Funds of India (AMFI) operates in accordance with the laid down guidelines of SEBI. Formation of index fund was conceptualized and rationalized by AMFI to direct investment for specific index.

Definition and features of the Index Funds:

The Index funds are those types of funds which accumulates stocks of each and every company that make up a particular index. The performance of the Index fund thus depends on the performance of that particular index. Investments in Index funds are cheaper and are regarded as passive form of investments. Another advantage of investing in the Index funds is that their values are so high that most of the other funds fail to supersede the value of the Index funds. The most popular type of Index funds is the Standard & Poor's 500. Investments in index funds are subject to income tax exemptions.

Advantage of Index Funds

Index Funds are advantageous for risk-averse investors. The various advantages of Index Funds are -

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Low transaction costs Low expense ratio Less risk Low dependence on performance of fund manager. Fund of funds is a type of mutual fund in which investment is done in other mutual funds. Fund of funds offer a diversified portfolio to the investors. A mutual fund is a consortium of independent organizations that accumulates the investments of investors, both institutional and individual having common financial objectives. The corpus accumulated by such investment is invested in capital market instruments. The capital market instruments in which such investments are made are, shares, debentures and other types of securities. The profit earned on such investments is shared by the unit holders in proportion to the number of units owned by them. Mutual fund is one of the most popular and suitable type of investment instrument for the common investors. The main advantage of investing in mutual funds is that they are relatively low in price and involves lower risk factor in comparison to other forms of financial market investment instruments. Moreover, the Chapter III of the Income Tax Act, 1961 provides tax exemption on mutual fund investments.

Authorities to the fund of funds in India:

The fund of funds in India operates according to the guidelines laid down by the Association of Mutual Funds of India (AMFI). Further, the Association of Mutual Funds of India (AMFI) operates in accordance with the laid down guidelines of the Securities and Exchange Board of India (SEBI).

Definition and features of the Fund of Funds:

Amongst the wide variety of mutual funds are available in India, fund of funds is a type of mutual fund wherein, the corpus accumulated is invested in types of other mutual funds. Further, the most significant feature of fund of funds is that it holds shares of a variety of mutual funds. Furthermore, Funds of funds are structured in such a way so as to attain a more diversified approach than what the other types of mutual funds offer. Generally, the Fund of Funds costs higher than any other type of mutual fund. This is due to the fact that the cost of Fund of Funds involves part of the expense fees charged by the component funds Ways to Choose a Mutual Fund in India involves various steps such as, selecting those funds whose objectives match with those of the investor, evaluate the earlier performance of the funds, and consider the costs of the fund. The various steps in Ways to Choose a Mutual Fund in India must be followed carefully by the investors for this will ensure that their money are invested in funds that suit their needs. Ways to Choose a Mutual Fund in India involves many steps of which the first is to find out those funds whose objectives of investment are the same with those of the investor. The usual objectives of investment of mutual funds are low or high risk, short or long term focus on liquidity, equity or fixed income, turnarounds or blue- chips, and focused on sector or general equity. The second step is to asses the past performance of the mutual funds. This enables the investor to get an idea about the performance of the fund in comparison to its peer group and also the objectives that it has stated. The way in which an investor can evaluate the past performance of the mutual funds is to find out the funds that have been performing the best and who also go along with the investment objectives of the investor. Then the investor should asses the performance of the mutual funds over different periods like three months, one year, and three years. The investor should then shortlist the mutual funds that stand among the top five in all of these horizons of time. The third step in the many Ways to Choose a Mutual Fund in India is to diversify which means to select two or three mutual funds that go along with the investment objectives of the investor in order to expand the amount of investment. The fourth step in the various Ways to Choose a Mutual Fund in India is to consider the costs of the fund which means the cost that the investor has to pay when he is making investments through the mutual fund. The various fund costs includes sales loads, yearly fund expenses, and management fees. The investor should carefully examine the fund costs before he chooses a Mutual Fund.

Major mutual fund companies in India are:

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Tata Mutual Fund Morgan Stanley Mutual Fund India Kotak Mahindra Mutual Fund ABN AMRO Mutual Fund Prudential ICICI Mutual Fund Franklin Templeton India Mutual Fund Unit Trust of India Mutual Fund State Bank of India Mutual Fund

Selling a mutual fund is a strategic decision for any investor. A common mistake is to treat mutual funds similar to shares and selling off a mutual fund to buy a cheaper one. This might result in the selling off of a high-value portfolio with good growth prospects. Mutual fund may be sold due to certain important considerations on the part of the investor.

Possible Reasons for Selling a Mutual Fund-

A financial need can lead to the selling of a mutual fund. An investor may sell off a mutual fund to meet some financial requirement. Certain funds prove to be poor performers when compared to the highest performing ones - There are some mutual funds who are considered as good performers if calculated on an average return basis. But these funds when compared to the top performers are found to be poor performers. In that case, if a fund is consistently performing below the benchmark, then it is advisable to sell it off and turn to a better fund. Re balancing the portfolio - A change in financial status leads to the re balancing of a portfolio. Selling of the equity and reinvesting in debt securities restores the original balance. Change in the policy of taxes - When the taxation policy changes at any point of time, its better to sell of the fund.Change in the fund size- Sometimes the fund size tends to change and this affects the return to a great extent. Therefore when the fund size gets too big to manage or too small to capture, it is the best time to sell the fund.

Mutual Fund Firms in India offer different kinds of mutual funds to suit the varying needs of investors. The Mutual Fund Firms in India are regulated by the AMFI. The mutual fund firms in India offers a wide variety of mutual funds, each tailor made to suit the need of the investor. Today, there are plenty of mutual fund firms in India catering to the need of the investors and the numbers of such firms are growing steadily. A mutual fund accumulates the investments of institutions and individuals having common financial objectives. The funds so accumulated are invested in capital market instruments like the shares, debentures and other securities. The income accrued through such investments is distributed in proportion to the number of units owned by them. Mutual fund firms in India offers one of the most popular and suitable type of investment instrument for the common investors. Further, mutual fund firms in India also offer an opportunity to invest in a diversified and professionally managed portfolio along with the opportunity to avail tax exemptions on investments.

Authorities to the Mutual Fund Firms of India:

The mutual fund firms in India are regulated by the Association of Mutual Funds of India (AMFI). Further, the Association of Mutual Funds of India (AMFI) operates in accordance with the laid down guidelines of the Securities and Exchange Board of India (SEBI). Some of the most popular mutual fund firms of India are as follows:

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SBI Mutual Funds Prudential ICICI Bank Of Baroda Bajaj Capital DSP Merrill Lynch Mutual Fund India Franklin Templeton Mutual Fund India Standard Chartered Mutual fund India Tax Saving Mutual Funds are highly preferred by the investors as they can enjoy the benefits of Section 88 (of the Income Tax Act). There are a range of parameters which should be followed by the investors who wish to invest in the tax saving mutual fund to ensure returns over a long period.

A Short Note on Tax Saving Mutual Funds in India-

Tax Saving Mutual Funds are one of the most preferred areas for investments. This is mainly because the investors treat the tax saving funds at par with the regular diversified equity funds. They would just follow the same process while choosing a tax saving fund just as they would have done in case of equity fund. A proper study on the performance of the tax saving mutual fund for at least a period of three years or five years is essential for every investor to avoid unnecessary hassles that might pop up later on. The lock-in period for the fund is determined by the fund manager so that the investors cannot sell the stocks anytime they want as selling of stocks at wrong time, especially when the value of stocks lower down is quite inexpedient for the company.

Ways To Select a Tax Saving Mutual Fund

Performance of a Tax Saving Mutual Fund:

The investors are advised to assess the tax saving mutual fund on the returns of its Net Asset Value before going for a purchase. A tax saving mutual fund is determined on the basis of its performance on the Nifty, Sensex and BSE 200. To evaluate the performance of a tax saving mutual fund, it is essential to invest in it for three or five consecutive years.

Investment Approach:

It is also very important for the investors to have a profound knowledge about the investment approach of the fund manager of the tax saving mutual fund. The investment patterns are either managed through strong systems or individually of which the first one is more relevant though the fund managers enjoy the full privilege to make decisions on the fund. In the first process, the investors get a clear picture beforehand about the investment patterns.

Volatility and risk-return:

The investors should choose a fund that has a lower 'standard deviation' as this is used to determine the volatility in the performance of the fund's NAV.

Expenses:
There are a lot of expenditures entailed in a tax saving mutual fund. These expenses include the fund manager's salary, costs for marketing or advertising of the fund, and other administration costs. The investors should consider the expense ratio of the fund before investing in it. The expense ratio precisely implies the percentage of the fund's assets that corresponds with the cost set for running that particular fund. A lower expense ratio is advantageous for the returns of the fund as the Net Asset Value is calculated after subtracting the expenses.

Other Parameters that should be considered by the Investors:


The investors must also consider the entry load and track record of the asset management company of the tax saving mutual fund. Some AMCs do not charge the entry load on investments which are made through systematic investment plans.

Some of the Top Performing Tax Saving Mutual Funds During 2007-08
SBI Magnum Taxgain HDFC Mutual Fund (Long Term Advantage Fund) HDFC Mutual Fund (Tax Saver) Birla Sunlife Mutual Fund Franklin India Taxshield

Performance of Mutual Funds


Mutual Fund was introduced in the year 1963 in India. UTI is the first concern to deal with mutual fund in India. The performance of mutual fund started going high after liberalization in the country. Mutual Fund came into existence in India in the year 1963. Unit trust of India was the first association to launch the concept of Mutual Fund in India. It invited a lot of investors to invest in UTI Mutual Funds in order to make savings. UTI Mutual Fund ruled India for around 30 years and there were no competitors till 1988 when some new mutual fund companies came into existence. In spite of this, UTI Mutual Fund had always remained in the leading position. The performance of Mutual Funds

in India started climbing the ladder of success with the consistently good performance of UTI Mutual Fund. Initially, people in India were not very much familiar with the Mutual Funds. In the year 1992, that is, in the postliberalization era around 24 million shareholders or investors in the UTI Mutual Fund were assured high returns on investing in Mutual Funds. UTI Mutual Funds schemes actually sold the idea of getting benefited by investing in mutual funds to the Indian population which proved to be a successful measure in attracting investors. There was 0% risks involved in mutual funds schemes after liberalization and the number of investors started increasing rapidly thereafter. The Assets Under Management of UTI Mutual Fund stood at ` 67 billion by the end of the year 1987. It rose to ` 470 billion in March 1993 and by April 2004, the figure reached thrice the amount of March 1993 and stood at ` 1,540 billion. The net asset value (NAV) of mutual funds started to go down with the falling of share prices in 1992. Portfolio shifts were not allowed into alternative investments during the crisis period. The closed-end funds were floated in the Indian market at that time which made the investors sell the shares at a loss in the secondary market. The performance of mutual funds in India went through a lot of turmoil especially in the year 1992 when there was a terrible decline in the stock prices. Losses were faced by the investors while disinvesting in the secondary market and the rules and regulations were not clear enough to rule out the ambiguity in the minds of investors regarding investment in mutual funds in India. The current trading value is 1020 percent discount on the net asset value of the mutual funds. Various mutual funds in India are planning to introduce pension schemes in mutual funds and launch open-ended funds. Lifting the rigidity in restrictions designed for the mutual funds investments would make the system more flexible and beneficial. Fees Associated with Mutual Funds widely include load, management and expense fees, redemption fees, and back end loads. Fees are charged from investors.

An Overview of Mutual Funds in India-

A mutual Fund is a fund which is managed by an investment company and it is the right way to make savings for retirement, education or other financial purposes. There are many investors who wish to enjoy benefits of professional portfolio management but are hindered by various restrictions on money matters. Mutual Funds in India offer the investors with a wide spectrum of securities. The basic advantages offered by Mutual Funds in India include variety, less investment amount, and liquidity. The investment amount collected from various investors cuts down the risk factor and provides a better way of obtaining some good investments. The Mutual Fund is governed by a fund manager who buys various portfolios of investments with the money collected from various investors. The participation in the mutual funds by various investors depends on the units they hold. It represents the investments carried out in the fund. The investors receive a calculated interest in the funds depending on the shares they hold in the mutual fund.

Fees associated with mutual funds-

All Mutual Funds in India charge a fee from the investors. These fees have been enumerated as under: Load- This is charged at the time of purchasing shares in various mutual funds and is charged as a percentage of the first investment made. It is usually recognized as a kind of sales commission. Management and Expense fees- This fee is charged by the mutual fund in order to manage the investments, that is, the money collected from various investors. This fee is given to the fund manager to carry out the

management procedures in investments. The management and expense fee is charged as a percentage of the fund's assets on a yearly basis. Redemption fees- The redemption fee is charged while selling the shares in a mutual fund. Back end loads- The back end loads are charged while withdrawing the money from the fund. This fee is charged in order to bring down the frequency of money withdrawal from the funds.

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