MUTUAL FUNDS

Abhishek Shedjale

Roll no. 02
 BASICS
 Basic s of MUT UA L FUN D.The ar ti cle
men tio ne d belo w, is for the
inve stors who have not ye t sta rted
inve sting in mutua l fun ds , but
will ing to explo re the o ppo rt unit y
and al so for those who wa nt to
clear the ir bas ics fo r wha t is mut ual
fun d a nd how bes t it can serve as
an inve stment too l.
 Get ting St art ed
 Befo rewe move to expl ai n wha t is
mut ual f und, it’ s very imp ort ant t o
kno w the ar ea in whic h mutua l
fun ds works , the b as ic
unde rst anding of stoc ks and bonds .
 STOCKS
 Stocks represent shares of ownership in a
public company. Examples of public
companies include Reliance, ONGC and
Infosys. Stocks are considered to be the
most common owned investment traded
on the market.
 BONDS
 Bonds are basically the money which you lend to
the government or a company, and in return you
can receive interest on your invested amount,
which is back over predetermined amounts of
time. Bonds are considered to be the most
common lending investment traded on the
market.
There are many other types of investments
other than stocks and bonds (including
annuities, real estate, and precious metals), but
the majority of mutual funds invest in stocks
and/or bonds.
 WORKING OF MUTUAL FUND
WORKING
 Wh at is a M utual F und?
 It is ju st the conn ec ti ng bri dge or a fin anci al
inte rm ediary that allows a grou p o f inv esto rs to pool
th eir mon ey tog eth er with a p red etermi ned in ves tmen t
ob jec ti ve. The mutu al fun d wil l h ave a fu nd man ager who
is res ponsib le fo r in ves ti ng th e gath ere d mon ey in to
specif ic secur iti es ( stocks or b on ds). When y ou in ves t in
a mu tual fun d, y ou are buy in g u nits or p orti on s of th e
mu tu al fu nd and th us on in ves ti ng becomes a
share hol der or uni t hol der of the fu nd . Mutu al fu nd s are
con sid ered as one of th e bes t avail able inv estme nts as
comp are to oth ers t hey are very cos t eff ici ent and also
ea sy to in vest i n, th us b y pooli ng mon ey tog eth er in a
mu tu al fu nd, inv estors ca n purch ase stocks o r bon ds with
mu ch l ow er tradi ng cos ts th an if th ey t ried to d o it on
th eir ow n. But th e big gest advanta ge to mutu al fu nds is
divers ificat ion , b y min imiz ing risk & m axi miz in g re tu rn s.
 Regu la tory Au thoriti es
 To prot ect t he i nt ere st of the inv esto rs, SEBI for mul at es p ol ici es and
reg ul at es the mut ual fund s. It n otifi ed reg ul at io ns in 19 93 ( full y revise d
in 19 96) and issues guid el ines fr om t ime to time. MF eit her pro mot ed b y
pub lic or b y pri vat e sec tor ent iti es inc lud ing one promot ed by forei gn
ent ities i s gov erned by these Re gul at ions.
SEBI a ppro ved As set Manag ement Comp any (AMC) ma nag es the fund s
by ma king inv est ment s in vari ous typ es of securi ties . Cust od ian,
reg ist ered wi th SE BI, hol ds the sec uri ties of vari ous sc he mes of the
fund in its cust ody.
Ac cordi ng to SEBI Regu la ti ons, two th ird s of th e di re ct ors of
Tru ste e Company or boa rd of tru ste es must be inde pen den t.
The As soci ation of Mu tu al Funds in In dia (AM FI ) rea ssure s th e
in ve st ors in unit s of mutual funds that the mutu al funds
funct ion wi th in the str ic t regu latory fra me work . Its obje ct iv e is
to incr ea se pu blic awa ren es s of the mu tu al fund in dustry .AMFI
als o is en ga ge d in upg ra di ng prof es si on al standa rd s and in
prom oti ng be st indu str y pra ct ice s in div er se area s such as
va lu ation , dis clos ure, tr anspa re ncy etc .
ABHISHEK SHEDJALE

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