- Mutual funds pool money from investors and invest it in a portfolio of stocks, bonds, and other securities. - There are different types of mutual funds that invest in different asset classes depending on their investment objectives, such as equity funds, debt funds, and hybrid funds. - Mutual funds offer investors several benefits such as professional management, diversification, liquidity, and convenience.

1.  Concept of Mutual Fund
 Types of Mutual Fund
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2.  It is a trust that pools the savings of a number of
investor who share a common financial goal.
 Professional fund managers then invest these funds in a
way that helps investors achieve their goal.
 The income earned through these investments and
the capital appreciation realized are shared by its
unit holders in proportion to the number of units
owned by them.
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4.  Mutual funds seek to mobilize money from all possible investors.
 Various investors have different investment preferences.
 In order to accommodate these preferences, mutual funds mobilize
different pools of money.
 Each such pool of money is called a mutual fund scheme.
 Every scheme has a pre-announced investment objective. When
investors invest in a mutual fund scheme, they are effectively
buying into its investment objective.
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5.  When a scheme is first made available for investment, it is
called a ‘New Fund Offer’ (NFO). During the NFO,
investors may have the chance of buying the units at their
face value.
 During the NFO, investors may have the chance of buying
the units at their face value.
 Post NFO, when they buy into a scheme, they need to pay
a price that is linked to its NAV.
 When the investment activity is profitable, the true worth
of a unit goes up; when there are losses, the true worth of
a unit goes down. The true worth of a unit of the scheme
is otherwise called Net Asset Value (NAV) of the scheme.
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6.  Professional Management
 Affordable Portfolio Diversification
 Economies of Scale (reduce cost)
 Liquidity
 Tax Benefits
 Tax Deferral (accumulation of profit)
 Convenient Options
 Investment Comfort
 Regulatory Comfort
 Systematic Approach to Investments
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7.  Mutual Fund are subject to a Market risk
 Diversification of portfolio does not maximize return
 Lack of portfolio customization
 No control over Costs in a scheme
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10.  Open ended Schemes are open for investors to enter or exit
at any time.
 The main feature of such kind of scheme is liquidity.
 When existing investor acquire additional units or new
investor acquire units from the open ended scheme, it is
called sale transaction.
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11.  When investors choose to return any of their units to
the scheme and get back their equivalent value, it is
called a re-purchase transaction.
 They sell and repurchase schemes on a continuous
basis.
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12.  These are the schemes in which redemption period is
specified.
 Investors can buy units of a close-ended scheme, from the
fund, during its NFO.
 Once the units are sold by mutual funds, after that
transaction takes place in secondary market only i.e stock
exchange.
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13.  Interval Funds are a kind of mutual fund scheme in
which the units can be purchased and sold only at
predetermined time intervals.
 The periods when an interval scheme becomes open-
ended, are called ‘transaction periods’.
 The period between the close of a transaction period,
and the opening of the next transaction period is called
‘interval period’.
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16.  Diversified equity fund is a category of funds that invest
in a diverse mix of securities that cut across sectors.
 Sector funds however invest in only a specific sector. For
example, a banking sector fund will invest in only shares
of banking companies. Gold sector fund will invest in
only shares of gold-related companies.
 Thematic funds is an extension of a Sector Fund. It is a
fund that invests in stocks based on a particular theme.
For example, an infrastructure thematic fund might invest
in shares of companies that are into infrastructure
construction, cement, steel etc.
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17.  Equity Linked Savings Schemes (ELSS):ELSS is a type of
diversified equity mutual fund which is qualified for tax
exemption under section 80C of the Income Tax Act and
offers the twin advantage of capital appreciation and tax
benefits. It comes with a lock-in period of three years.
 Rajiv Gandhi Equity Savings Schemes (RGESS): It offer
tax benefits to first-time investors. Investments are subject to
a fixed lock-in period of 1 year, and flexible lock-in period
of 2 years.
 Equity Income / Dividend Yield Schemes invest in
securities whose shares fluctuate less, and the dividend
represents a larger proportion of the returns on those shares.
The NAV of such equity schemes are expected to fluctuate
lesser than other categories of equity schemes.
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18.  Gilt Funds
 Diversified Debt funds
 Junk Bond Schemes
 Fixed Maturity Plan
 Floating rate funds
 Liquid schemes or Money Market schemes
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19.  Gilt funds invest in only treasury bills and government
securities, which do not have a credit risk.
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20. Diversified debt funds on the other hand, invest in a mix
of government and non-government debt securities such
as corporate bonds, debentures and commercial paper.
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21.  Junk bond schemes or high yield bond schemes invest
in companies that are of poor credit quality.
 Such schemes operate on the premise that the attractive
returns offered by the investee companies makes up for
the losses arising out of a few companies defaulting.
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22.  Fixed maturity plans are a kind of debt fund where the
investment portfolio is closely aligned to the maturity
of the scheme.
 Fixed Maturity Plans are investment schemes floated
by mutual funds and are close ended with a fixed
tenure.
 The maturity period ranging from one month to
three/five years.
 These plans are predominantly debt-oriented, while
some of them may have a small equity component.
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23. It invest largely in floating rate debt securities i.e. debt
securities where the interest rate payable by the issuer
changes in accordance with the market.
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24. It is a variant of debt schemes that invest only in short term
debt securities.
Liquid fund is a category of mutual fund which invests
primarily in money market instruments like certificate of
deposits, treasury bills, commercial papers and term deposits.
Lower maturity period of these underlying assets helps a fund
manager in meeting the redemption demand from investors.
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25.  Monthly Income Plan seeks to declare a dividend or
interest every month. It therefore invests largely in debt
securities.
 Balanced Fund category: These schemes were
historically launched for the purpose of giving an
investor exposure to both equity and debt
simultaneously in one portfolio. The objective of these
schemes was to provide growth and stability.
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26. Capital Protected Schemes are close-ended schemes,
which are structured to ensure that investors get their
principal back, irrespective of what happens to the market.
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28. The aim of growth funds is to provide capital
appreciation over the medium to long- term. Such
schemes normally invest a major part of their corpus in
equities. Such funds have comparatively high risks.
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29. Funds that invest in medium to long-term debt
instruments issued by private companies, banks, financial
institutions, governments and other entities belonging to
various sectors (like infrastructure companies etc.) are
known as Debt Funds.
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30. These funds provide both growth and regular
income as these schemes invest in debt and equity. The
NAV of these schemes is less volatile as compared pure
equity funds.
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31. Money market / liquid funds invest in short-term
(maturing within one year) interest bearing debt
instruments. These securities are highly liquid and
provide safety of investment, thus making money
market / liquid funds the safest investment option
when compared with other mutual fund types.
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32. Fee Based
Load
Funds
No Load
Funds
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33.  A load fund is a mutual fund that carries a fee to
purchase or sell its shares. This load is expressed as
percentage of the amount invested.
 A no load fund is a mutual fund that does not charge
any fees of this type.
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34. Tax Benefits
Tax Exempt
Funds
(ELSS)
Non Tax
Exempt Fund
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35. Other
Schemes
Commodity
Funds
Real Estate
Funds
Exchange
Traded Funds
Funds of
Funds
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36. Commodity funds are mutual funds that seek to track the
underlying price of various commodities and natural
resources. For e.g crops, metals, precious metals,
petroleum products etc.
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37.  A real estate mutual fund (REMFs) is a type of investment
which is made up of securities including stocks of real
estate companies.
 A large part of these funds goes into investment in
commercial and corporate properties, residential complexes
and agricultural land.
 REMFs can invest in property, directly or indirectly.
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38.  Exchange Traded funds (ETF) are open-ended funds,
whose units are traded in a stock exchange.
 Performance of funds are depends on sectoral
performance.
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39.  A mutual fund scheme that invests in other mutual fund
schemes, Fund of Funds offer tax friendly rebalancing of
your portfolio.
 The strategy is to invest in a portfolio that consists of
underlying assets rather than directly investing in stocks
and bonds and other securities. By broadly diversifying the
asset allocation in a variety of fund categories, these allow
you a good exposure without very high risk.
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40. Q.1 Which term describes the process through which a company
offers shares to investors for the first time?
 Follow on public offering
 New fund offer
 Initial public offering
 Rights issue
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41. Q.2 A significant benefit of open-end schemes is
 Low cost
 Better portfolio
 Superior returns
 Liquidity
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42. Q.3 Indian Mutual Fund industry is well regulated
by__________
 RBI
 SEBI
 Banks
 Issue Company
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43. Q.4 A initial period offer made of fixed price units when a
new scheme is launched by a fund house is
called________
 IPO
 NFO
 ETF
 Right Issue
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44. Q.5 Units’ of_____________ must be listed on the stock
exchange.
 Sector funds
 Arbitrage funds
 Close ended funds
 Liquid funds
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45. Q.6 Investment objective is closely linked to ________.
 Scheme
 Option
 Plan
 SIP
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46. Q.7 Open-ended schemes generally offer exit option to
investors through a stock exchange.
a. True b. False
Q.8 Sector funds invest in a diverse range of sectors.
a. True b. False
Q.9 High yield bond schemes invest in junk bonds.
a. True b. False
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