A mutual fund is a pool of savings contributed by multiple investors. The common fund so created is invested in one or many asset classes like equity, debt, liquid assets etc. It is called a ‘mutual’ fund because all risks, rewards, gains or losses pertaining to, or arising from, the investments made out of this savings pool are shared by all investors in proportion to their contributions.
A mutual fund is in essence a Trust with a sponsor. They are registered with SEBI (Securities Exchange Board of India) who approves the Asset Management Company (AMC) managing the fund. The AMC is under the purview of the trustees who have to ensure the fund complies with regulation.
There are some terms unique to mutual funds which investors should be aware about.
Mutual funds have become a very popular investment option in India and this trend still continues with new funds and schemes being introduced in the market regularly. Some of the key reasons why people invest in mutual funds are outlined below.
Mutual funds are open to a wide range of investors including Resident Individuals, NRIs, PIOs, HUFs, Companies, Partnership Firms, Trusts, Cooperative Societies, Banking and Non-Banking Financial Institutions, registered FIIs, QFIs etc. This is not an exhaustive list but represents the more commonly known types of investors in mutual funds in India.
Mutual funds are made easily accessible to investors. Applications can be made in the following ways.
Online transactions are becoming increasingly popular for many reasons, as mentioned below.
There are many different types of mutual funds categorised based on structure, asset class and
Mutual funds offer investors many benefits. However, the onus of making a sound investment lies on the investor. Funds should be chosen keeping in mind investment objective, liquidity requirements. investment timelines and affordability.
Investment and returns
When you are planning to apply for a mutual fund scheme, you should assess and fix your financial investment goals, evaluate your investment horizon, and gauge your risk profile. There is a broad array of mutual funds for you to choose from and hence, you may get confused.
If you have long-term goals with a high appetite for risks and an investment horizon of 5 years and above, then you can choose an equity mutual fund scheme.
Among the various equity schemes, you can go for a large-cap mutual fund scheme or an equity-oriented balanced scheme if you are a conventional investor. You can select small-cap or mid-cap schemes if you are an aggressive investor. To maintain a balance, you can go for multi-cap or large-cap schemes if you are a moderate investor.
20th July 2017
The AUM of Mirae Asset Mutual Fund has gone above the significant limit of Rs.10,000 crore on July 5. This increase was approximately 50% in the calendar year and extremely high compared to the AUM of Rs.3.4 crore in March 2016.
Mirae Asset MF has been in India for over 9 years and has experienced a massive increase in the number of new customers. The number of investor folios went above Rs.5 lakh. The SIP flows also rose excellently from Rs.29 crore in March 2016 to Rs.115 crore (in the form of monthly inflows) in May 2017.
19th July 2017
Reliance Industries Ltd (RIL) sold the highest number of shares in the month of June in the sector of domestic funds. According to reports, the company sold Rs.1.4 crore with the help of mutual funds.
From the beginning of this year until June, the stock of RIL went up to 27.79%. This has been the company’s best performance until the year 2009. It is the highest valued company in the nation.
Meanwhile, in the case of State Bank of India (SBI), one of the most popular lenders in India, had shares that were mostly purchased by these mutual funds. Mutual fund houses purchased a net of Rs.3.3 crore of SBI stocks in the month of June.
18th July 2017
Over the past few years, mutual funds have become very prevalent among a lot of retail investors in India. A few asset management companies filed draft with the Securities and Exchange Board of India in May 2017 launch 15 new mutual fund schemes. The companies have filed applications for debt, equity, balanced and fixed maturity plans (FMPs).
Some of the companies that have filed applications include Birla Sun Life MF, Reliance MF, HSBC MF, HDFC MF, Union MF, Franklin Templeton MF, and DSP BlackRock MF.
These new schemes will soon be offered once the required clearances are done.
14th June 2017
Market regulator SEBI has advised fund houses to depend upon their own research for portfolio sorting and to not rely solely on credit agencies for portfolio ratings. SEBI wants fund houses to have their own system of credit risk assessment. The regulator is expected to come out with more guidelines which are sectoral as well as company-specific.
There are some issues with respect to the rolling of guidelines however, SEBI is confident of resolving those and coming out with the guidelines as soon as possible. This move has been prompted due to some mutual fund schemes facing huge losses in the recent past.
2nd December 2015
Mutual funds have the norm of paying out their worth when considered for a long term investment. Though short term funds are also available, the healthy mix of strong performing funds and secure opportunities in long term mutual funds are a much lucrative option. Keeping the same in view, Principal Pnb, a mutual fund house based out of Mumbai, will be launching its first fund of funds that is aimed at long term wealth generation.
The mutual fund thus being started will be investing in principal schemes that are already in place. There will a choice of three offerings that offer various options of growth, namely - conservative, moderate and aggressive. While the first will have maximum of 30% stake in equities and the rest in fixed income, moderate option can have a 20-60% stake in performing high-cap equities. As its name suggests, the aggressive option will bank more on the equities share of the portfolio, with a stake of 70-90%.
1st December 2015
Mutual funds have slowly made their niche quite a sizable one in the investments market and are being considered more readily by the layman as compared to the scenario a few years earlier. That in turn has made institutions offering mutual funds more open towards projecting more financing into various options of investments.
The downside of the deal is that many MF institutions are not being wary about their own research in their investment regarding debt papers and are relying too much on rating agencies. In order to curb this unhealthy trend, the Securities and Exchange Board of India (SEBI) has a proposal to impose limits on how much investment can be done in a single sector and a single investee company. The concrete decisions regarding the same will be passed soon.
30th November 2015
Domestic mutual funds are continuing to receive strong inflows from investors in the last 18 months. Despite a low in the market, the ownership in Indian equities has witnessed an all-time high of around. According to the latest report by Bank of America Merill Lynch (BofA-ML), there has been an inflow of $18 billion in domestic mutual funds for 18 consecutive months.
The report also stated that despite negative sentiments and backed by strong inflows, domestic mutual funds have continued to increase at the BSE500 by 4.6%, which is an all-time high. The high inflow of 18 consecutive months has been a first in the last 15 years. Domestic mutual funds are also continuing to receive strong inflows from individual investors.
27th November 2015
Reliance Mutual Fund has filed offer document with SEBI in the aim of launching an open ended diversified equity scheme for children, ‘ Reliance Children Fund’. The new fund offer price is pretty low at Rs.10 per unit. The entry load is nil and the exit load is 1% if it is redeemed or switched before attainment of 18 years of age. There is no exit load if it is redeemed or switched after 18 years of age or after 3 years of lock in period of the policy. The scheme is aiming to collect a minimum target amount of Rs.10 crore. One can avail growth and dividend option with this scheme.
26th November 2015
SBI Mutual Fund introduced SBI Debt Fund Series B-28 for 1,100 days. This is a close ended income scheme and the NFO opens for subscription on 23rd November, 2015 and it closes on 26th November, 2015. Entry load exit load will not be applicable to this scheme. The minimum subscription amount is Rs.5,000 and thereafter in multiples of Re.1. The performance is benchmarked against Crisil Short Term Bond Fund Index. Rajeev Radhakrishnan the Fund manager. The main objective of this scheme is to provide regular income and enhance capital growth with limited interest rate risk to the investors. The investment portfolio consists of debt instruments such as government securities, PSU, corporate bonds and money market instruments maturing on or before the scheme matures.
25th November 2015
GST rate of 18% applicable for all financial services effective July 1, 2017.