MUTUAL FUNDS

HISTORY UTI WAS THE ONLY MUTUAL FUND OPERATING SINCE IT IS AN OPEN ENDED FUND- UNITS CAN BE PURCHASED AND SOLD BACK TO UTI ANY TIME. IT WAS A PUBLIC SECTOR MONOPOLY POSITION FUND. MANY TAX BENEFITS WERE OFFERED FOR BUYING UNITS SINCE 1987 MANY PUBLIC SECTOR BANKS SET UP THEIR MUTUAL FUNDS- FOLLOWING AN AMENDMENT IN THE BANKING REGULATION ACT-THAT COMMERCIAL BANKS CAN CARRY ON NON-BANKING BUSINESS. MUTUAL FUNDS BUSINESS WAS THROWN OPEN TO PRIVATE AS WELL AS FOREIGN INSTITUTIIONS AFTER 1992—LIBERALISATION. MUTUAL FUNDS CATER TO THE NEEDS OF SMALL SAVERS AND INDIVIDUAL INVESTORS.

DEFINITION IT IS AN ASSOCIATION OR TRUST OF MEMBERS WHO WISH TO INVEST IN FINANCIAL INSTRUMENTS FOR MUTUAL BENEFITS. FUNDS COLLECTS MONEY FROM MEMBERS AND INVESTS SUCH MONEYS IN DIVERSIFIED PORTFOLIO OF FINANCIAL ASSETS WITH A VIEW TO REDUCE RISKS AND MAXIMISE INCOME. INVESTORS ARE BENEFITTED BY THE EXPERTISE AVAILABLE WITH THE MUTUAL FUND. MUTUAL FUNDS ARE OF VARIOUS TYPES OPEN ENDED CLOSE ENDED WITH SPECIFIC TIME FRAME WHERE THE MATURITY MAY ALSO BE FIXED.

TYPES OF MF..CONTD.. ON THE BASIS OF OBJECTIVES— INCOME FUND GROWTH FUND (CAPITAL APPRECIATION) BALANCED FUNDS (INCOME AND GROWTH) ON THE BASIS OF INVESTMENT PATTERNS— INVESTMENT IN GOVT.SECURITIES INVESTMENT IN DEBENTURES INVESTMENT IN EQUITIES SECTORWISE INVESTMENT MONEYMARKET MUTUAL FUNDS TAXATION FUNDS

TYPES OF FUNDS..CONTD.. LEVERAGE FUNDS—THEY ARE USED TOINCREASE THE SIZE OF THE VALUE OF PORTFOLIO(BORROWED FUNDS) DUAL FUNDS- SINGLE INVESTMENT OPPORTUNITY FOR TWO DIFFERENT TYPES OF INVESTORS –INCOME UNIT AND CAPITAL UNITS. INDEX FUNDS- THE PORTFOLIO IS DESIGNED IN SUCH A MANNER THAT THEY REFLECT THE COMPOSITION OF SOME BROAD BASED INDEX –SECURITIES IN THE SAME PROPORTION AS INDEX. IT INVOLVES LESS ADMINISTRATIVE EXPENSES AND LOWER TRANSACTION COST. BOND FUNDS– PORTFOLIO CONSISTS OF FIXED INCOME SECURITIES –BONDS. OFF-SHORE FUNDS– MEANT FOR NON-RESIDENT INVESTORS.REGULATED BY THE PROVISIONS OF THE FOREIGN COUNTRY WHERE IT IS REGISTERED.

IMPORTANCE OF MUTUL FUNDS CHANNELISING SAVINGS OFFERING WIDE PORTFOLIO INVESTMENT PROVIDING BETTER YIELDS EXPERT INVESTMENT ADVICE AT LOW COST TAX BENEFITS PROVIDING RESEARCH SERVICE INTRODUCING FLEXIBLE INVESTMENT SCHEDULE. SIMPLIFIED RECORD KEEPING SUPPORTING CAPITAL MARKET PROMOTING INDUSTRIAL DEVELOPMENT KEEPING MONEY MARKET ACTIVE.

RISKS OF MUTUAL FUNDS MARKET RISKS SCHEME RISKS INVESTMENT RISKS (EXPERTISE) EXTERNAL RISKS ORGANISATION OF FUND SPONSORING INSTITUTION PROMOTING FUND TEAM OF TRUSTEES. ASSET MANAGEMENT COMPANY TO DEAL WITH FUNDS ASSETS EXPENSES MAXIMUM 1.25 % IF THE FUND IS LESS THAN 100 CR.AND 1 % IF IT EXCEEDS 100 CRORES.

FACILITIES AVAILABLE TO THE INVESTORS REPURCHASE FACILITY REISSUE FACILITY ROLL OVER FACILITY (REINVESTING FOR ANOTHER TERM) LATERAL SHIFTING FACILITIES S I P NET ASSET VALUE– TRHE REPURCHASE PRICE IS LINKED TO NAV. IT IS MARKET VALUE OF THE SECURITIES HELD DIVIDED BY THE NUMBER OF UNITS.. IT IS THE INTRINSIC VALUE OF THE UNIT.

INVESTORS’ RIGHTS UNIT CERTIFICATE WITHIN 10 WEEKS FROM DATE OF CLOSURE FOR CLOSE ENDED AND 6 WEEKS FOR INITIAL OFFER. TRANSFER WITHIN A PERIOD OF 30 DAYS. REFUND OF APPLICATION MONEY(STATUTORY MINIMUM AMOUNT 20 CRORES FOR CLOSE E NDED,50 CRORES FOR OPEN ENDED OR 60 % OF TARGETED AMOUNT WHICHEVER IS HIGHER.APPLICATIOPN MONEY HAS TO BE RETURNED WITHIN 6 WEEKS

SOME SHORTCOMINGS OF MFS DISPARITY BETWEEN NAV AND LISTED PRICE NO UNIFORMITY IN CALCULATION OF NAV LACK OF TRANSPERANCY POOR INVESTOR SERVICING EXCESSIVE DEPENDENCE ON OUTSIDE AGENCIES ABSENCE OF QUALIFIED SALES FORCE INVESTORS EXPECTATIONS ALWAYS RISING -=-HENCE BIG PROMISES.