what are mutual funds ?

I am new to the field of mutual funds . there are various queries regarding mutual funds .kindly help me to solve them. please tell me what are these terms – asset allocation pattern of the scheme, plan and options,minimum application amount,expenses of the scheme, risk profile of the scheme, bench mark index,despatch of repurchase applicable nav ,expense of the scheme ?

7 Replies to “what are mutual funds ?”

  1. Good to here that U took the help of us and I am a financial advisor,
    ok i will help you out;

    A mutual fund is nothing more than a collection of stocks and/or bonds.

    You can think of a mutual fund as a company that brings together a group of people and invests their money in stocks, bonds, and other securities. Each investor owns shares, which represent a portion of the holdings of the fund.

    At the fundamental level, there are three varieties of mutual funds:
    1) Equity funds (stocks)
    2) Fixed-income funds (bonds)
    3) Money market funds

    You can make money from a mutual fund in three ways:
    1) Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all of the income it receives over the year to fund owners in the form of a distribution.
    2) If the fund sells securities that have increased in price, the fund has a capital gain. Most funds also pass on these gains to investors in a distribution.
    3) If fund holdings increase in price but are not sold by the fund manager, the fund’s shares increase in price. You can then sell your mutual fund shares for a profit.

    Asset Allocation:

    Under the investment objective header, look out for your scheme’s asset allocation. This information is given in a tabular form. It tells you the percentage of your scheme’s allocation in various assets, like equity and debt. Ensure that your fund invests a significant portion of its assets in relevant categories.

    Minimum application amount/Expenses of the scheme:

    Costs are the biggest problem with mutual funds. What’s even more disturbing is the way the fund industry hides costs through a layer of financial complexity and jargon.
    Fees can be broken down into two categories:
    1. Ongoing yearly fees to keep you invested in the fund.
    2. Transaction fees paid when you buy or sell shares in a fund (loads).

    • The cost of hiring the fund manager(s) – Also known as the management fee, this cost is between 0.5% and 1% of assets on average. While it sounds small, this fee ensures that mutual fund managers remain in the country’s top echelon of earners. Think about it for a second: 1% of 250 million (a small mutual fund) is $ 2.5 million – fund managers are definitely not going hungry! It’s true that paying managers is a necessary fee, but don’t think that a high fee assures superior performance.

    • Administrative costs – These include necessities such as postage, record keeping, customer service, cappuccino machines, etc. Some funds are excellent at minimizing these costs while others (the ones with the cappuccino machines in the office) are not.

    On the whole, expense ratios range from as low as 0.2% (usually for index funds) to as high as 2%. The average equity mutual fund charges around 1.3%-1.5%. You’ll generally pay more for specialty or international funds, which require more expertise from managers.

    Minimum Investment;

    The amount you have set aside for investing in the mutual fund may be less than what the fund may allow. Find out the scheme’s minimum investment limit. Different schemes of the same fund may have different minimum investment limits.

    The Securities and Exchange Board of India guidelines for mutual funds mandate that MFs can charge a maximum cumulative load (entry as well as exit) of up to 7 per cent. For instance, HDFC [Get Quote] Equity Fund’s entry load is 2.25 per cent. This means, that if you invest Rs 10,000 in the scheme, you end up paying Rs 225 as entry load. The balance, Rs 9,775, gets deployed in the markets.

    Buying and Selling:

    You can buy some mutual funds (no-load) by contacting the fund companies directly. Other funds are sold through brokers, banks, financial planners, or insurance agents. If you buy through a third party there is a good chance they’ll hit you with a sales charge (load).

    Selling a fund is as easy as purchasing one. All mutual funds will redeem (buy back) your shares on any business day. In the United States, companies must send you the payment within seven days.

    The Value of Your Fund:

    Net asset value (NAV), which is a fund’s assets minus liabilities, is the value of a mutual fund. NAV per share is the value of one share in the mutual fund, and it is the number that is quoted in newspapers. You can basically just think of NAV per share as the price of a mutual fund. It fluctuates everyday as fund holdings and shares outstanding change.
    When you buy shares, you pay the current NAV per share plus any sales front-end load. When you sell your shares, the fund will pay you NAV less any back-end load.


    Carefully read the instructions to fill the form.

  2. Mutual Funds are nothing but the Financial Advisors Golden Goose.
    The Financial advisors will make you invest heavily and enjoy the fat commission from your hard earned money and then they will ditch you and move on to a new customer[Bakara].
    You will not only loose your Principal amount invested but after some time loose you initial investment.
    Put your hard earned money in the present recession only in FIXED DEPOSIT but in a Public Sector Bank and a maximum of Rs 1 Lakh as they are insured

  3. I think mutual funds and particularly the hedge funds is once known as the sin funds. You can learn a lot in the following article about the stock market basics. I have been living in the International Capital of scams of stock shares (including bonds, warrants, accumulator, and funds) and real estate transactions and learn a decent and smart person shouldn’t spend too much money in the investments. Mutual funds are managed by a group of fund mangers teaches (they arranged your investment with minimum consultation or without notice as it described in the article about hedge fund) same as what gentleman said those managers also arranged how to make your investment reduced or vanished. I like to give you the true information about the so called carry over interest or compensation that those fund managers are eligible to take it from your Fund Account. They can get their compensation or predicted growth from your account in advance. That’s how those invested in mutual funds gradually lost all their monies gradually. It is a smart scam and legitimate in law, probably implementing the so called deregulation provides the loophole to cheat the investors’ monies. It is estimated the vanished invested monies over 40 trillion US dollars. Why don’t spend your extra savings to pursue a college degree?

  4. The reliable and safe investment is “My FX Funds” Managed Forex Account if you would like to make 2% above per month.

    search for myfxfunds in yahoo search engine for more information.

  5. A Mutual Fund is nothing but a common pool of money collected from a lot of people which is used by an experienced fund manager who invests the money in the Share market. Not many of us are experienced in investing directly in the Equity market. Mutual funds are a boon to the investor who doesnt have enough knowledge to invest directly in the market but wants to take a risk and gain higher returns from the market.

    A Mutual fund works as follows. (I am not getting into the technical terms. This is a very simple explanation)

    Mr. X who has a lot of experience in the share market decides to start a MF. He calls for prospective investors. Say investors A, B, C, D & E decide to invest Rs. 10000/- each, Mr. X would be starting his MF with a corpus of Rs. 50000/- X would be creating MF units of face value Rs. 10/- each and distribute it to all the investors. So each A, B, C, D & E would get 1000 units each.

    To know more visit: http://anandvijayakumar.blogspot.com/2008/10/what-is-mutual-fund.html

    Mail me at [email protected] if you have any further queries

Leave a Reply to Rangila Cancel reply

Your email address will not be published. Required fields are marked *

16 + two =