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Mutual Funds :: Product                                   
Making Mutual Funds Work for you

   WHAT IS A MUTUAL FUND?
   A Mutual Fund is a trust that pools the saving of a number of investor who share common financial goals. 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 thus collected is then 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 and the income earned through these investments and the capital appreciation realised by the scheme are shared by its units holder in proportion to the number of unit owned by them. Thus 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.

TYPES OF MUTUAL FUND SCHEMES

 There are a wide variety of mutual fund schemes that cater to your needs, whatever your age, financial position, risk tolerance and return expectations.

  OPEN-ENDED SCHEMES
 
 These do not have a fixed maturity. You deal directly with the mutual fund for your investments and redemption. The key feature is liquidity. You can conveniently buy and sell your units at net asset value (“NAV”) related prices.

  CLOSED-ENDED SCHEMES

  Schemes that have a stipulated maturity period (ranging from 2 to 15 years) are called close-ended schemes. You can invest directly in the scheme at the time of the initial issue and thereafter you can buy or sell the units of the scheme on the stock exchanges they are listed.

  GROWTH SCHEMES

  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.

  Ideal for: 
        Investors in their prime earning years  
        Investors seeking growth over the long-term

  INCOME SCHEMES  

  Aim to provide regular and steady income to investors. These schemes generally invest in fixed income securities such as bonds and corporate dedentures. Capital appreciation in such schemes may be limited.

  Ideal for: 
         Retired people and others with a need for capital stability and regular income
         Investors who need some income to supplement their earnings

  BALANCED SCHEMES

  Aim to provide both growth and income by periodically distributing a part of the income and capital gains they earn. They invest in both shares and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV of these schemes may not normally keep pace or fall equally when the market falls.

  Ideal for: 
        Investors looking for a combination of income and moderate growth

  Money Market/Liquid Schemes

  Aim to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer, short-term instruments such as aim to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer, short-term instruments such as treasury bills,   certificate of deposit, commercial paper and interbank call money.

  Ideal for:  
        Corporate and individual as a means to park their surplus funds for periods or awaiting a more
         favourable investment alternative

  OTHER SCHEMES

  Tax Saving Schemes: 

  These schemes offer tax rebates to the investors under tax laws as prescribed from time to time. This is made possible because the Government offers tax incentives for investments in specified avenues. Equity Linked Savings Schemes (ELSS) and Pension Schemes.

  Ideal for:
        Investors seeking tax rebates

  SPECIAL SCHEME / INDEX FUND SCHEME

  This category includes index schemes that attempt to replicate the performance of any index such as the BSE Sensex or the NSE 50, or industry specific schemes (which invest in specific industries) or sectoral schemes (which invest in exclusively in segments such as ‘A’ Group shares or initial public offerings).

  Sectoral fund schemes are ideal for investors who have already decided to invest in a particular sector or segment.

  Keep in mind that any one scheme may not meet all your requirements for all time. You need to place your money judiciously in different schemes to be able to get the combination of growth, income and stability that is right for you. Remember, as always, higher the return you seek higher the risk you should be prepared to take.

  A few frequently used terms are explained here below:

  Net Asset Value("NAV")  
  Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is net asset value of the scheme divided by the number of units outstanding on the Valuation Date.

  Sale Price
  Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load.

  Repurchase Price
  Is the price at which a close-ended scheme repurchases its units and it may include a back-end load. This is also called Bid Price.

  Redemption Price
  Is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. Such prices are NAV related.

  Sales Load
  Is a charge collected by a scheme when it sells the units. Also called ‘Front-end’ load. Schemes that do not charge a load are called ‘No Load’ schemes.

  Repurchase or ‘Back-end’ Load
  Is a charge collected by a scheme when it buys back the units from the unit holders.
Mutual Funds
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