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The Basics
Mutual funds are investment avenues that pool the money of several
investors to invest in financial instruments such as stocks, debentures etc.
Mutual fund companies have fund managers who invest the unit holders
money in the above mentioned avenues to rake in maximum returns.
Close Ended: These are funds that are open only for a specific
period after which you'd have to buy them from the secondary
market.
Tax saving: These are equity linked saving schemes that offer tax benefits
under Section 80 C and have a compulsory lock in period of three years.
Special schemes: These are select funds that aim at replicating the
performance of an index. Also there are funds that invest in specific
sectors that fall under this category.
1-
Sponsor
Sponsor is the person who act alone or in combination with another body
corporate establishes a mutual fund.
Sponsor must contribute at least 40% of the net worth of the Investment
Managed and meet the eligibility criteria prescribed under the Securities
and Exchange Board of India (Mutual Funds) Regulations, 1996.
The Sponsor is not responsible or liable for any loss or shortfall resulting
from the operation of the Schemes beyond the initial contribution made by
it towards setting up of the Mutual Fund.
2-
Trust
3-
Trustee
The provisions of the Trust Deed and the Offer Documents of the respective
Schemes.
At least 2/3rd directors of the Trustee are independent directors who are not
associated with the Sponsor in any manner.
4-
The Trustee as the Investment Manager of the Mutual Fund appoints the
AMC.
The AMC is required to be approved by the Securities and Exchange Board of
India (SEBI) to act as an asset management company of the Mutual Fund.
5-
NAV..
NAV or Net Asset Value is the market value of the assets per
unit after deducting the liabilities.
Here's how the NAV is calculated:
(Market Value of the Scheme's Investments) + Other Assets
(including accrued interest)+ Un amortized Issue Expenses
(only in case of schemes launched on a load basis) - All
Liabilities except unit capital and reserves)} Divided by the
number of units outstanding at the end of the day.
Lock-in period
If investment is in equity linked saving schemes (ELSS) the lock in period is
three years. Which means your money will remain locked in with the mutual
fund company for a period of three years.
SIP
SIP or Systematic Investment Plan enables you to invest an amount
on a regular basis and bring about a disciplined approach to investing.
Through SIP you are able to get more or less units of a fund over a
period of time with the investment amount remaining constant. If
you're planning a SIP note that the minimum amount you can invest is
Rs.500.