3 Mutual Fund is…A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal.Anybody with an investible surplus of as little as a few thousand rupees can invest in Mutual Funds.These investors buy units of a particular Mutual Fund scheme that has a defined investment objective and strategy.The money collected is invested by the fund manager in different types of securities. These could range from shares to debentures to money market instruments, depending upon the scheme’s stated objectives.The income earned through these investments and the capital appreciation realized by the scheme are shared by its unit holders in proportion to the number of units owned by them.
9 Types of Mutual Funds SBI MF Serve Open-end FundAvailable for sale and repurchase at all times based on the net asset value (NAV) per unit.Unit capital of the fund is not fixed but variable.Fund size and its total investment go up if more new subscriptions come in than redemptions and vice-versa.Closed-end FundOne time sale of fixed number of units.Investors are not allowed to buy or redeem the units directly from the funds. Some funds offer repurchase after a fixed period. For example, UTI MIP offers a repurchase after 3 years.Listed on stock exchange and investors can buy or sell units through the exchange.Units maybe traded at a discount or premium to NAV based on investor’s perception about the funds future performance and other market factors.
10 Mutual Fund Types Money Market Funds/Cash Funds Invest in securities of short term nature I.e. less than one year maturity.Invest in Treasury bills issued by government, Certificates of deposit issued by banks, Commercial Paper issued companies and inter-bank call money.Aim to provide easy liquidity, preservation of capital and moderate income.Gilt FundsInvest in Gilts which are government securities with medium to long term maturities, typically over one year.Gilt funds invest in government paper called dated securities.Virtually zero risk of default as it is backed by the Government.It is most sensitive to market interest rates. The price falls when the interest rates goes up and vice-versa.
11 Debt Funds Debt Funds/Income Funds Invest in debt instruments issued not only by government, but also by private companies, banks and financial institutions and other entities such as infrastructure companies/utilities.Target low risk and stable income for the investor.Have higher price fluctuation as compared to money market funds due to interest rate fluctuation.Have a higher risk of default by borrowers as compared to Gilt funds.Debt funds can be categorized further based on their risk profiles.Carry both credit risk and interest rate risks.
12 Equity FundsInvest a major portion of their corpus in equity shares issued by companies, acquired directly in initial public offering or through secondary market and keep a part in cash to take care of redemptions.Risk is higher than debt funds but offer very high growth potential for the capital.Equity funds can be further categorized based on their investment strategy.Equity funds must have a long-term objective.
13 Hybrid Funds Balanced Funds: Has a portfolio comprising of debt instruments, convertible securities, preference and equity shares.Almost equal proportion of debt/money market securities and equities. Normally funds maintain a Equity-Debt ratio of 55:45 or 60:40.Objective is to gain income, moderate capital appreciation and preservation of capital.Ideal for investors with a conservative and long- term orientation.
16 CONCLUSIONAfter studying & analyzing different mutual fund schemes the following conclusions can be made:Diversified stock portfolios have offered superior long term inflation protectionPortfolio managers have done a fairly good job in generating positive returnsThose who want to eliminate the risk element should invest in MFThe Performance of SBIMF is good, and there is more prospect chances.