The document discusses mutual funds, which are investment vehicles that collect money from investors and invest it in stocks, bonds, and other securities. Returns from these investments are shared with investors according to the agreement. The key points are: - Mutual funds allow individual investors to participate in a diversified portfolio managed by professionals at a low cost. - Investors can choose from different types of mutual funds based on their goals, such as growth funds, income funds, and balanced funds. - While mutual funds provide benefits like diversification and professional management, they also involve fees and risks that are lower than direct stock investments. - It is important for investors to understand the costs, risks and their rights involved

1. You might have heard about companies like, Reliance Mutual Fund, Tata
Mutual Fund, and SBI Mutual Fund etc. These are the companies collect
money from you (the investor) and invest in stocks, bonds or any other
securities. Return received from these funds is share with the investor as
per agreement. The Company and Investor mutual agree to invest some
fund and share return as per agreement. So the amount you invested in
this method is called Mutual Fund.
Say you bought Mutual Fund of Rs 100,000.00 from Reliance mutual
fund with a return assurance of Rs 200,000.00 after 3years. That means
you gave Reliance Mutual Fund Rs 100,000.00 with an agreement that
they will invest it some security and manage the money on an ongoing
basis for you , and will give you a return of Rs 100,0000.00 and principal
amount of Rs 100,000.00 after 3years. This return is not guaranteed
since it will be invested in public market which is subjected to
fluctuation.

2. The executive managing funds is called Fund Manager. Some more
example of these companies are Sharekhan, HDFC securities, ICICI
direct, LIC (Life Insurance Corporation, India) etc.
A Mutual Fund is the most suitable investment for the common
man as it offers an opportunity to invest in a diversified,
professionally managed basket of securities at a relatively low
cost. In stocks the investors have to analyze and manage his fund,
where as in Mutual Fund a professional fund manager manages it
of behalf of the investor. The company managing Mutual Funds
takes some charge for this (Details on charges will be explained in
subsequent articles).

3. The Mutual Fund Company collects
from Individual investors as Mutual
Fund and invests it in various
securities ranging from shares to
debentures & money market etc,
depending upon the schemes'
objectives. The income earned
through these investments and the
capital appreciation (rise in value of
the stock) realized by the scheme are
shared with the investors in
proportion to their investment
amount in line with the terms and
conditions of the agreement
Mutual Fund Cycle
between Investor & Mutual Fund
company.

4. It is clear that Mutual Fund gives relatively lower return than
Stock, then why someone should go for Mutual Fund? The answer
is very simple. If you invest in stock, you have to analyze the
volatility, risk involvement, worthiness of the stock and decide
your investment. You have to manage your fund. For becoming a
good fund analyzer or fund manager you need considerable
knowledge and experience. Risk is higher if you are not competent
enough in taking investment decision.
On the other side by buying a mutual fund, you are assigning a
professional fund manager to manage your fund, who is better
than you in terms of fund management and investment decision
making skill. Thus your risk for losing money is reduced and you
needn't to run with Sensex or Nifty and various financial indexes
and ratios. You are paying some charge to the fund manager for
this.

5. Mutual funds are supported by following advantages,
Management by Professionals
You avail of the services of experienced and skilled professionals
who are backed by a dedicated investment research team who
analyzes the performance and prospects of companies. With
analyzed data given from research professionals they select
suitable fund to meet investment objectives.
For doing all these research you may need full dedication on this
subject, financial knowledge and enormous time with experience.
This is the biggest advantage with Mutual Fund w.r.t other
investment ideas.

6. Diversification of Investment
Mutual Fund managers invest in a number of companies across a
broad cross section of industries and sectors. This diversification
reduces the risk because very rarely do all stocks decline at the
same time and in the same proportion. For you doing all these
needs experience, knowledge & dedication. You achieve this
diversification through a Mutual Fund company with far less
money than you can do on your own.
Easier Administration
Investing in a Mutual Fund reduces paperwork and helps you
avoid many problems such as bad deliveries, delayed payments
and unnecessary follow up with brokers and companies. Mutual
Funds save your time and make investing easy, convenient &
enjoyable. The amount they charge for this is far less than the
result you get.

7. Liquidity flexibility
At any time you can buy or sell the mutual fund through your bank
or Mutual Fund Company.
Well Regulated
Mutual Funds in India are registered with SEBI (Security and
Exchange Board of India) and they function within the provisions
of strict regulations designed to protect the interests of investors.
The operations of Mutual Funds are regularly monitored by SEBI.
In other countries also they are registered with respective
regulatory act
Higher return potential
Over a medium to long-term, Mutual Funds have the potential to
provide a higher return as they invest in a diversified basket of
selected securities.

8. Fees
This is a major disadvantage that ruins your income. Running a
Mutual Fund organization is off course an expensive task. All
expenses from Fund managers salary to Investors transaction
statements is charged from investor’s income indirectly. Fee
structures vary from fund to fund. You should give vigilant
attention to the fee structure to avoid negative consequences at a
later stage.
Professionalism in Fund Manager
The fund manager may be less capable than you. No one is more
worried about your money than yourself. Capability of the Fund
manager/Mutual Fund Company can be accessed from their past
records. Carefully understand the Mutual Fund companies past
records and the consistency of the positive or negative returns.

9. Taxes
Everywhere taxes are imposed. You have to pay taxes for your
incomes unless the investment is recognized as tax benefit
investment under govt. rules. Selecting a proper plan taking care
to tax benefit rules can minimize the taxes.
Lower return
Return is lower than stocks. Because of the fees charged by your
mutual fund company for doing all analysis on behalf of you.
Irrespective all these disadvantages Mutual Funds always take
considerable part in good investors' portfolio due to lower risk and
good return

10. There is variety of Mutual Funds to suit everyone’s investment
style. Always there is Mutual Fund to cater your needs irrespective
of your age, financial position, risk tolerance, investment style,
return expectations etc.
We are going to discuss different types of mutual funds available.
It is suggested that you discuss with your Mutual Fund Company
or bank regarding details about types of Mutual Fund with
amount risk & return, before investing. Because always theories
are different than practical. Ask as many questions as possible to
the bank executive so that you get a clear picture about where
you are going to invest your money. Don't hesitate to ask doubts,
because they are paid from your money to answer you.

11. Growth Funds
These investments aim to provide capital appreciation over the
medium to long term. These schemes normally invest a majority
of their funds in equities and are willing to bear short term decline
in value for possible future appreciation.
Suitable for: Investors seeking for growth of their fund over long
terms.
Income Funds
These investments aim to provide regular and steady income to
investors. These schemes generally invest in fixed income
securities such as bonds and corporate debentures.
Suitable for: Investors seeking regular income. Like Retired people
& someone seeking supplementary income.

12. Balance Funds
These investments aim to provide both growth and income by
periodically distributing a part of the income and capital gains they
earn. These funds are invested in both shares and fixed income
securities in the proportion indicated in their offer documents.
Suitable for: Investors seeking for income with growth at the same
time.
Money Market Funds
These investments provide moderate income but your capital is
relatively safe. Here funds are invested in short term instruments
such as treasury bills, certificates of deposit, commercial paper and
interbank call money.
Returns on these schemes may be affected by fluctuation of interest
rates prevailing in the market.
Suitable for: Investors as a means to park their surplus funds for
short periods or awaiting a more favorable investment alternative.

13. Tax saving Schemes (Equity Linked Saving Scheme - ELSS)
These schemes offer tax incentives to the investors under tax laws
as prescribed by government from time to time and promote long
term investments in equities through Mutual Funds.
Suitable for: Investors seeking for tax savings.
Fixed Maturity Plans
The objective of such investment is to emphasize on steady returns
over a fixed-maturity period with protection to the investors against
market fluctuations. Your fund is locked for certain period
depending on scheme, during the lock period you are not allowed to
withdraw. Even though a good return is expected in this investment
but it is not guaranteed.
Suitable for: Investors seeking for growth of their fund in course of
time.

14. You must be clear in what way you are going to earn in Mutual
Funds. Basically there are three ways to earn money from Mutual
Funds.
Dividends and Interest
Bonds pay interest & some stocks pay dividends. These interest and
dividends are passed on to the investors in proportion to their
investments. You will be taxed yearly on this income unless the
investment is tax free as per Govt. rules.

15. Appreciation value
Increase in stock price is called appreciation or opposite is
depreciation. When market price of stocks increases to expected
value fund managers sell it. Value earned due to increase in price is
called Capital gain and the opposite is Capital loss. At the yearend
difference in capital gain and loss, if higher is paid to the investors in
proportion to their investment. Here also you will be taxed yearly on
this income unless the investment is tax free as per Govt. rules.
Net Asset Value (NAV) of the Mutual Fund.
If the company does not sell but holds securities that have increased
in value, the value of the shares of the mutual fund (called as NAV)
increase and there is a profit. This also is a capital gain. However,
you will not be taxed on this capital gain until the year you sell the
fund

16. Always there is risk in every investment. Risk is high or low
depending on market condition & expected gain. Risk can never be
eliminated; however it can be minimized with effective fund
management by diversification & application of experience &
expertise in the fund management. Mutual Funds suffer less risk
factor than stock since these are managed by professionals. But
enough risk is involved depending on capability of the fund
manager.
Following steps may help you to understanding risk factors
underlying the investment,
1. Find out the tract record in return of the Mutual Fund Company
you are going to invest in. Comparative higher return tract record
can give a positive signal to your investment.

17. 2. Understand the volatility of the Mutual Fund you are investing in,
through various financial research reports. What are the financial
reports are how to read them will be discussed later in this section.
3. You can seek advice from your friends & relatives in choosing
Mutual Fund Company and stocks (Strictly from those who know
about Mutual Fund and have some experience & expertise).
Try to avoid free tips from various un-trusted websites over internet.
Also free advices from friends & relatives who don't about the
reality.

18. Various technical aspects are there to be considered while selecting
a Mutual Fund. But we will emphasis on certain general criteria to
be considered while selecting a Mutual Fund. Please consider the
following points while stepping out for buying a Mutual Fund,
Determine your goal. What for you are going to invest in Mutual
Fund? Be clear on your goal. Determine what type of fund you
should choose for achieving your goal. Consider risk factors involved
in the fund and risk factor that you can manage. You may need
funds giving higher return to meet your goal, but higher return
comes with higher risk, ask yourself whether you can manage with
that much risk.

19. Most important step is choosing a good fund manager. That is, to
which company you are going to give your money. In India there are
no of companies offering Mutual Fund. For example, HDFC
Securities, ICICI Direct, India Bull, Sharekhan ltd. etc. Please find
time and analyze about the following details of the Fund Managers,
1. How old the company is? If the company is nearly 5years old you
can trust on. There is no defined rule; new company also can be
trusted.
2. Get performance details about these companies over last at least
5 years. These details you can find from various websites like
www.moneycontrol.com, www.moneycentral.com etc. A little
search on Goggle or Yahoo can give you enormous data. You can
ready various financial research reports available on the above
mentioned sites, News papers etc

20. 3. Consider reliability of the Fund Manager. They should be
approved by local approving authority. In India SEBI (Security and
Exchange Board of India) is the approving authority. Normally they
are approved
4. Consider their features for easy trading and accessibility. Whether
they are available over phone, email etc. easily. Also there office
should be nearer for better communication
Now you have selected a Fund Manager (Or Broker), your goal is
clear.
Discuss about your goals with the Mutual Fund Company. What
types of fund they have to meet your goal. They will suggest many
schemes, you can analyze and scrutinize. All of them or none of
them may or may not meet your requirement, but you should find a
fund that meets most of your requirement. If you feel that this
company is not at all meeting your requirement, you can go to some

21. All of them or none of them may or may not meet your
requirement, but you should find a fund that meets most of your
requirement. If you feel that this company is not at all meeting your
requirement, you can go to some other company. Roads are always
open. It is your money and you have to decide the best way to
invest.
Always be clear about risk involved in the fund you are investing in.
Some technical aspect you may consider which will be discussed in
Analysis of Mutual Fund articles in the subsequent articles.

22. Understanding various fees attracted in Mutual Fund is very
important. Most of the people don't know what are the fees killing
their income. Unless you know this it is difficult to be successful
Mutual Fund investor.
Your broker can give you clear picture in fees & taxes applicable,
since it varies Fund manager to Fund manager. Read their terms &
conditions carefully, ask them about fee structures, ask all the
doubts you have and be clear.

23. As a Mutual fund holder coming under the SEBI (Securities Exchange
Board of India/Mutual Funds) Regulations, you have the following
rights,
1. Receive unit certificates or statements of accounts confirming
your title within 30 days from the date of closure of the
subscription under open-ended schemes or within 6 weeks from
the date your request for a unit certificate is received by the
Mutual Fund
2. Receive information about the investment policies, investment
objectives, financial position and general affairs of the scheme.
3. Receive dividend within 30 days of their declaration and receive
the redemption or repurchase proceeds within 10 working days
from the date of redemption or repurchase
4. Inspect the documents of the Mutual Funds specified in the
scheme’s offer document.

24. 5. Receive communication from the Trustees about change in the
fundamental attributes of any scheme or any other changes which
would modify the scheme and affect the interest of the unit holders
and to have option to exit at prevailing Net Asset Value without any
exit load in such cases and other rights as per SEBI guidelines.
Above rights are typical only. You can get full details from your local
legal adviser or from your broker. In other countries rules are almost
same but get cleared from your broker or any legal adviser.
Please read & understand the terms and conditions carefully during
purchasing a Mutual Fund from your company. Most of the people
don't read this and many who read doesn’t understand. Take your
own time and understand the jargons involved in it. The above
stated rules may vary with respect to your agreement with Mutual
Fund Company.