2. Definition: A Mutual Fund is a institution
which collects small amount of money
from retail investors and invest the pool
money in the stock, debt and money
market and pay the investors dividend in
form of units.
The units can be sold off by the investors to
realize money from their investment
3. Type of Mutual Fund
On the basis of their organization Mutual
Fund may be
i. Unit Trust ( is a British form of
organization where the investor can
enter the investment once and exit once)
ii. Mutual Fund ( Is the US equivalent of
Unit Trust and it has exit and entry point
at the will of the investor)
4. On the basis of continuity MFs can be:
i. Close ended: It has a period in which the
investor can invest and it has a closing
time when all investments are
redeemed.
ii. Open ended: It starts the investment on
a certain day and the investors can keep
on purchasing the MF until the MF
closes down. They can also sell off their
holding at any point of time.
5. NFO or New Fund Offer:
This refer to the first time issuance of a new
mutual fund in the market.
Generally, very specific market oriented
MFs investment like, equity or sectarian
fund, debt fund, money market fund or
balanced finds are sold in the market in
the NFO’s
6. NFO vs. IPO:
NFO refer to the issuance of a Mutual Fund
IPO refer to the issuance of equity share
NFO are issued by Asset management Companies
IPO’s are issued by Public Limited Companies
NFO is an investment oriented term for both the
company and investors
IPO is investment for investors and capital
issuance for companies
7. NAV: This refer to the term net asset value.
Investment in an MF means getting an asset
by investors. The sum of these asset is
the total value of the MF.
Total Market Value of the Asset – Administrative Charge –
Depreciation of the fund
NAV = ----------------------------------------------
The total numbers of the investment units held
8. Dividend In MF: Dividend in MF is NAV
Based.
At the end of an investment period say 1
month, 3monts or 1 year, a statement is
issued to the investors stating the NAV
and the units held by them.
The product of NAV and Units is the total
divided available to the investor (s)
9. FUND Management: Each Mutual Fund by
name will have a fund manager whoc
will:
i. Act as the investment and portfolio guide
to the fund under his control.
ii. He/she shall be responsible for all legal
compliance
iii. He/she will be responsible for the growth
of the fund.
iv. He/she will reduce the market risk of the
investment
10. AMFI and regulation:
Association of Mutual Fund In India (AMFI) is the
body which regulates the MF’s in India.
It works in tandem with the SEBI and Stock
exchanges for promoting investment habit and
investment protection In India.
ROLE OF AMFI:
i. Monitor the MF’s
ii. Advice the MF’s
iii. Conduct Exam for having qualified distributor
for MF’s
12. Advantage:
i. Easy to invest
ii. No need to understand the market
iii. Professional help
iv. Easily available
v. Constantly Upgraded
vi. NAV is public information
vii. Legal protection
13. Disadvantage:
1. Subjected to market risk
2. No special protection law
3. Very difficult to judge one fund from
another
Some terms in MF:
1. Front and Back Load: Administrative
charges paid while entering or exiting the
investment
2. Upfront means administrative charge
paid one time at the time of investment
14. 3. Liquidate: To sale the MF units
4. Settlement: T + 3 days
5. SIP: Systematic Investment Plan.
6. NO default: Not being able to invest does
not lead to default.
7. Unit Linked: All the investment are
invested in units which is changed from
time to time.
