Mutual fund symbol lookup
There are several advantages of investing in a mutual fund . To begin with, one does not have to make one?s own investment decisions. One?s money is handled by top professionals employed by fund houses who decide what securities the fund will buy and sell. Moreover mutual fund industry is highly regulated, and protects investors from fraud . Regulators block funds from having more than a certain percentage of the fund in any one company .
This prevents over-exposure in one particular industry or stock. It is easy to get one?s money out of a mutual fund. Anybody can buy mutual fund units over the phone or Internet provided he or she maintains a good relationship with that fund. However, an investor should consider certain drawbacks before investing in a mutual fund . For instance, unlike a fixed deposit, a mutual fund does not give any guarantee on returns . If the stock market declines in value, the value of mutual fund shares will go down as well . An investor has to shell down an entry as well as an exit load . Not only this, when one invests in a mutual fund, one depends on a fund ?s manager to make the right decisions regarding the fund ?s portofolio.If the manager does not perform well, the investor does not make as much money as one expected .
The short-term focus of the money managers and pressure from unit holders for immediate performance are obstacles to long term growth. Most funds lack the cash reserves to off the massive redemptions which will follow a market panic. Fund managers can change without notice. For investors in India, the regulator is Securities and Exchange Board of India . Every country which allows mutual funds to operate has its own regulators .
Classification of schemes according to Investment Objective :
Growth/Equity oriented fund: 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. These schemes provide different options to the investors like dividend option, capital appreciation, etc ., and the investors may choose an option depending on their preferences . The investor must indicate the option in the application form . The mutual funds also allow the investors to change the options at a later date . Growth schemes are good for investors having a long term outlook seeking appreciation over a period of time . Income/Debt oriented Fund: The aim of income funds is to provide regular and steady income to investors . Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities, and money market instruments .
Such funds are less risky compared to equity schemes . These funds are not affected because of fluctuations in equity markets . However, opportunities of capital appreciation are also limited in such funds . The NAVs of such funds are affected because of change in the country. If the rates fall, NAVs of such funds are likely to increase in the short run and vice versa . However long term investors, may not bother about these fluctuations . Balanced fund: The aim of balanced funds is to provide both growth and regular income, as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents .
These are appropriate for investors looking for moderate growth . They generally invest 40-60% in equity and debt instruments . These funds are also affected because of fluctuations in share prices in the stock markets . However, NAVs of such funds are likely to be less volatile compared to pure equity funds . Money Market or Liquid funds: These funds are also income funds and their aim is to provide easy liquidity, preservation of capital and moderate income . These schemes invest exclusively in safer short-term instruments such as treasury bills, certificates of deposits, commercial paper and inter bank call money, Government securities etc . Returns on these schemes fluctuate much less compared to other funds . These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods . Gilt Funds: These funds invest exclusively in Government securities .
Government securities have no default risk . NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as is the case with income and debt oriented schemes . Index Funds: Index funds replicate the portfolio of a particular index such as the BSE Sensitive Index, NSE 50 Index (In India), etc, .These schemes invest in the securities in the same weightage comprising of an index . NAVs of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as ?tracking error? in technical terms. Necessary disclosures in this regard are made in the offer document of the mutual fund scheme . There are also exchange traded index funds launched by the mutual funds which are traded on the stock exchanges .
Sector specific Funds: These are funds /schemes which invest in the securities of only those sectors or industries as specified in their offer documents .e.g.,Pharmaceuticals, Software, Fast Moving Consumer goods, Petroleum stocks,etc,. The returns on these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns; they are more risky than diversified funds. Investors have to keep a watch on the performance of those sectors/industries and must exit at an appropriate time. They may also seek the advice of an expert. Load or No-Load fund: A Load fund is one that charges a percentage of NAV for entry or exit . That is, every time one buys or sells units in the fund, a charge will be payable . This charge is used by the mutual fund for marketing and distribution expenses .
The investors should take the loads into consideration while making investments as these affect their yields/returns. However, the investors should also consider the performance track record and service standard of the mutual fund which are more important . Efficient funds may give higher returns in spite of loads . A no-load fund is one that does not charge for entry or exit . That means an investor can enter the fund/scheme at NAV and no additional charges are payable on purchase or sale of units. Such funds are very rare now. Before investing in any fund , investors should prioritize goals and their financial needs so that short-term swings of the market do not impact their overall returns.
Other Articles
